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TMI Blog2005 (12) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... btor under section 482 of the Code of Criminal Procedure. 3. The petitioner had availed of a loan from M/s. Oriental Bank of Commerce, Ernakulam Branch (for short, the Bank ). It is not in dispute that the Bank had approached the Debts Recovery Tribunal, Ernakulam for recovery of the outstanding dues payable by the petitioner under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short the RDDB Act ). The Tribunal had passed an order in favour of the bank and in fact issued a certificate of recovery as well. According to the petitioner the Recovery Officer had already initiated proceedings for sale of the property of the petitioner in execution of the certificate of recovery. 4. Anyhow, the admitted position is that the Bank filed an application before the Chief Judicial Magistrate, Ernakulam under section 14 of the Act praying, inter alia, to take possession of the secured asset and to pass such other appropriate orders as provided under the Act for enforcement of the secured interest. Though the petitioner had stoutly opposed the above application, the learned Chief Judicial Magistrate allowed the prayer and directed the parties to submit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etropolitan Magistrate in a Metropolitan area. In that view of the matter, the contention raised by the petitioner that the Chief Judicial Magistrate, Ernakulam is not entitled to exercise the powers under section 14 of the Act is liable to be rejected. I do so. 8. The next contention raised by the petitioner is that the Bank is not entitled to take recourse to the provisions contained under section 13 of the Act, since the Debts Recovery Tribunal had already issued a certificate of recovery against the petitioner, pursuant to the order passed by it for realisation of the debt payable by the petitioner. The thrust of the argument of the learned counsel is that the Bank has to recover the amount by sale of the property in execution of the certificate of recovery issued by the Tribunal. The Recovery Officer having already initiated steps for sale of the property, the Bank cannot invoke the power under section 13 of the Act. It is also contended that section 13 has no application since the petitioner has ceased to be a borrower because the Tribunal has already passed an order against him for recovery of the amounts. 9. Relevant clauses of section 13 are extracted hereunder : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 . . . ." 10. A perusal of the above provisions under section 13 undoubtedly shows that any secured creditor may enforce any security interest created in his favour without the intervention of the Court or Tribunal by taking recourse to the provisions contained under the Act. Sub-section (2) empowers the secured creditor to take possession of the secured asset of the borrower and do all such other acts as provided under sub-section (4), if the borrower fails to discharge his liabilities in full even after service of demand notice issued by the secured creditor. A secured creditor can take possession of the secured asset and also take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale to realise the secured asset. A manager can also be appointed to manage the secured asset which has been taken over. 11. Section 14 of the Act enables the secured creditor to seek assistance of the Chief Metropo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it shall pass such orders after recording the reasons therefor." Section 19 enables a Bank or a financial institution to make an application before the Tribunal to reover a debt from any person who has committed default in repayment. The provisos to sub-section (1) of section 19 were incorporated by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 with effect from 11-11-2004. A perusal of the above newly added provisos shows that a secured creditor has to seek permission of the Tribunal to withdraw the pending application before taking action under the Act, if no such action had been taken earlier. Admittedly, no application was pending before the Tribunal when the Bank had moved the Court of the Chief Judicial Magistrate under section 14 of the Act. It may be true that a recovery certificate had already been issued by the Tribunal for execution of the order passed by it. But that does not necessarily mean that any formal permission as provided under the first proviso to section 19 was necessary to initiate the proceedings under the Act. There is nothing in the RDDB Act which indicates that a secured creditor is precluded from taking recours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the secured asset which is the very same property ordered to be sold in execution of the order passed by the Tribunal. I am unable to agree with the above contention. It may be true that the clauses under section 13 of the Act specifically refer to borrower; but it cannot be said that the provisions contained in section 13 are in derogation of RDDB Act. 15. Section 37 of the Act clearly lays down that "the provisions of the Act or the rules made thereunder shall be in addition to and not in derogation of the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force". Moreover, a perusal of the objects and reasons of the Act undoubtedly shows that the Legislature wanted to give the financial sector and the Banking industry in India a more vibrant recovery mechanism in respect of long-term assets. It was felt that the existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and fina ..... X X X X Extracts X X X X X X X X Extracts X X X X
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