9911796707
TMI Blog2009 (7) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... KABIR AND CYRIAC JOSEPH, JJ. V.T. Gopalan for the Appellant. S. Sethuraman for the Respondent. JUDGMENT Altamas Kabir, J. - Leave granted in both the Special leave petitions. 2. The respondent-firm and its sister concern, M/s. Ashok Woodworks, which is also a partnership firm, availed of various loans from the appellant-Bank which were secured by movable and immovable assets. The loanee firms having defaulted in repayment of the loans and since their accounts became Non-Performing Assets (hereinafter referred to as NPA ), the Bank initiated action against them under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act ) and issued separate demand notices to the respondent partnership firm and its sister concern under section 13(2) thereof on 17-9-2002, and 21-9-2002, for the recovery of Rs. 1,56,47,638 and Rs. 1,40,18,468.36, respectively. 3. As the respondent and its sister concern did not respond to the said demand notices, the appellant-Bank invoked section 13(4) of the above Act and took possession of the secured assets on 4-12-2002. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposed of in its absence. On 6-10-2007, the appellant-Bank was permitted to open the sealed tenders which it had received pursuant to the sale notice dated 26-7-2007, subject to the condition that the sale effected would be subject to the confirmation of the Court. Pursuant to the said order, the sealed tenders were opened on 8-10-2007, and 3 of the 5 properties were sold and the same was recorded by the DRT. Subsequently, despite the pendency of the review petition, the respondent-firm withdrew S.A. No. 74 of 2007, and filed a fresh application being S.A. No. 104 of 2007. The review petition filed by the Bank before the Madurai Bench of the Madras High Court was consequently rendered infructuous and was dismissed on 23-6-2008. 5. Aggrieved by the said order, the Bank filed Writ Appeal No. 926 of 2008, which was dismissed by the Division Bench of the High Court on 1-9-2008, against which the present appeal has been preferred. 6. Appearing for the appellant-Bank, Mr. V.T Gopalan, learned Senior Advocate, urged that before the learned Single Judge it had been contended that the provisions of the SARFAESI Act being similar to an English mortgage, on the issuance of notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SI Act and the subsequent action taken to bring the secured assets to sale or to transfer the interest therein in any manner whatsoever, could not be made the subject-matter of inquiry before the DRT. In other words, the jurisdiction of the Tribunal under section 17(3) would have to be confined to any action taken by the secured creditor in taking possession of the secured assets under sub-section (4) of section 13 and not in regard to any subsequent steps which the secured creditor may take to dispose of the secured assets in accordance with the provisions of the Act. Mr. Gopalan submitted that the SARFAESI Act neither contemplates restoration of possession of the secured assets by efflux of time nor does it place a mandate on the secured creditor to dispose of the secured assets within a specified period. It was urged that since the secured assets vest with the secured creditor once possession is taken, the rules do not contemplate the involvement of the borrower in the sales process and the Authorized Officer is also empowered under rule 8 of the Security Interest (Enforcement) Rules, 2002, to sell the secured assets by way of private treaty. 9. Mr. Gopalan lastly contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 17. The same gave rise to a continuing cause of action which was available to a borrower to work out his remedy under section 17 of the SARFAESI Act by challenging the sale notice. 13. In support of his submissions, Mr. Sethuraman referred to and relied on two decisions of the Madras High Court in (1) Indian Overseas Bank v. G.S. Rajshekarn [2008] 4 MLJ 1012 and (2) Ramco Super Leathers Ltd. v. UCO Bank [2007] 5 MLJ 986, which were affirmed by the Full Bench of the Madras High Court in Lakshmi Shankar Mills (P.) Ltd. v. Authorized Officer/Chief Manager, Indian Bank [2008] 85 SCL 421 . Mr. Sethuraman submitted that after considering the provisions of section 17 in detail, the learned Single Judge relying upon the Division Bench judgment came to the conclusion that any person, including a borrower, could file an appeal under section 17 at any stage, including the stage when the management of the business is taken over or possession is taken of the secured assets of the borrower. In such a case, the Tribunal has power to restore possession in favour of the borrower, if such action taken under sub-section (4) of section 13 is declared invalid. 14. The main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r releasing the same. 19. The scheme of the SARFAESI Act as it now stands after the 2004 Amendment for enforcement of security interest is that notwithstanding the provisions of section 69 or section 69A of the Transfer of Property Act, any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or Tribunal, in accordance with the provisions of the Act. Chapter III of the Act which deals with enforcement of security interest begins with section 13, which is one of the sections relevant for a decision in this appeal. Since we are concerned with sub-sections (1) to (4) of section 13, the same are extracted hereinbelow : "13. Enforcement of security interest. (1) Notwithstanding anything contained in section 69 or section 69A 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer is held as security for the debt; ( c )appoint any person (hereafter 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." 20. The other relevant provision which is section 17 is also included in Chapter III and has been extensively amended after the decision in the Mardia Chemicals Ltd. s case ( supra ). The same is also reproduced hereinbelow for a better understanding of the scheme of the Act after the amendments effected : "17. Right to appeal. (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, [may make an application along with such fee, as may be prescribed] to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and disposed of within sixty days from the date of such application : Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1). (6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any part to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with authority to even set aside a transaction including sale and to restore possession to the borrower in appropriate cases. Resultantly, the submissions advanced by Mr. Gopalan and Mr. Altaf Ahmed that the DRT has no jurisdiction to deal with a post 13(4) situation, cannot be accepted. The dichotomy in the views expressed by the Bombay High Court and the Madras High Court has, in fact, been resolved to some extent in the Mardia Chemicals Ltd. s case ( supra ) itself and also by virtue of the amendments effected to sections 13 and 17 of the Principal Act. The liberty given by the learned Single Judge to the appellants to resist S.A. No. 104 of 2007 preferred by the respondents before the DRT on all aspects was duly upheld by the Division Bench of the High Court and there is no reason for this Court to interfere with the same. 24. We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in ter ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
