2012 (9) TMI 1126 - HC - Companies Law

Summary

Issues Involved:
The issues involved in this judgment are the validity of possession notice issued by a bank without considering the borrower's representations u/s 13(3A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the jurisdictional error committed by the bank in taking possession before disposing of the borrower's representations.

Issue 1: Validity of Possession Notice

The petitioner received a demand notice u/s 13(2) of the Act and submitted representations on 19th March, 2012, and 30th April, 2012, u/s 13(3A). The bank, without considering and disposing of these representations, issued a possession notice. The petitioner challenged this action through a writ petition, claiming that possession could not be taken without disposing of the representations. The Court found that the bank dispatched a response to the representations after the writ petition was filed, indicating an attempt to frustrate the petition. The response lacked an official memo number, raising doubts about its authenticity. The Court held that the bank's actions were questionable and set aside the response, directing the bank to reconsider the representations.

Issue 2: Jurisdictional Error

The bank issued the possession notice on 20th June, 2012, before disposing of the borrower's representations submitted on 19th March and 30th April, 2012. This premature action was deemed a gross jurisdictional error by the Court. The Act mandates that the bank must decide on any representations or objections from the borrower before taking measures u/s 13(4). Since the bank failed to follow this procedure, the possession notice was deemed invalid. The Court directed the bank to reconsider the borrower's representations and communicate its decision promptly. Until then, the possession notice was to have no further effect, ensuring the petitioner's possession remained undisturbed.

Conclusion

The Court set aside the response sent by the bank, instructing the bank to reconsider the borrower's representations and communicate a fresh decision. The possession notice was deemed invalid due to the bank's failure to dispose of the representations before taking possession. The petitioner's possession was protected until the bank's decision was communicated. The writ petition was disposed of with no costs awarded.