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TMI Blog2009 (10) TMI 531X X X X Extracts X X X X X X X X Extracts X X X X ..... at the respondent-bank cannot fall back upon the provisions contained under sub-section (4) of section 13, but must fall back upon the option of going to the civil court is a contention which disregards the provision of the Recovery of Debts Act which ousted the jurisdiction of the civil court. At any rate, any such option to fall back upon the otherwise normal mode of recovery, will be a far more time consuming affair and that would, even according to the writ petitioner, be further compounding the mischief to him. Therefore, it would be wholly in the interests of the writ petitioner to prevent the debt from escalating any further. Hence, for this reason also, we do not see any reason to interfere with the impugned notice. Appeal dismissed. - W.P. NO. 17716 OF 2009 - - - Dated:- 20-10-2009 - GHULAM MOHAMMED AND NOOTY RAMAMOHANA RAO, JJ. Mannikanti Laxmiprasad for the Petitioner. A. Anand Rao for the Respondent. ORDER Rao, J. This writ petition has been instituted questioning the legality and validity of the notice dated 30th April, 2009 issued by the respondent-bank in terms of sub-section (2) of section 13 of the Securitisation and Reconstruction of Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive remedies available to the bank for recovery of the amount due and payable by the defendants therein, the writ petitioner being one amongst them. Accordingly, preserving the liberty for pursuing the alternative remedies for recovering the amounts due from the respondents therein, the arbitration proceedings have been dismissed as withdrawn by an order passed on 29th April, 2009. Thereafter, the respondent-bank has issued notice dated 30th April, 2009 once again invoking the provision available under sub-section (2) of section 13 of the Act calling upon the addressees, which included the writ petitioner herein, to liquidate the total liability of Rs. 9,68,04,343 as is due as on 31st March, 2009, within 60 days from the date of receipt of the said notice. It is the validity and legality of this notice which is sought to be assailed in this writ petition. To complete the narration of facts, the writ petitioner through his counsel raised objections to the notice dated 30th April, 2009. The objections were lodged on 10th July, 2009. The said objections have been considered and negatived by the bank on 27th July, 2009, holding them untenable. 2. Learned counsel for the writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings including liquidation of the secured asset pursuant to the notice dated 21st June, 2004, the respondent-bank is seeking to unjustly enrich itself by more than Rs. 6 crore as of today. Learned counsel would also further submit that the guidelines in the form of prudential norms to be followed by every banker issued by Reserve Bank of India ('RBI') for purposes of classification of assets as non-performing assets ('NPA'), have been followed by the respondent-bank in the breach. Hence, it is contended that the action of the respondent-bank is grossly unjust and iniquitous and, therefore, the respondent-bank should not be permitted or allowed to proceed any further in the matter. 4. Learned counsel for the respondent-bank has drawn our attention to the material enclosed to the counter affidavit filed by the bank in the above matter. It is pointed out that the writ petitioner on 26th August, 2002 informed the Deputy Registrar of Cooperative Societies/arbitrator, in writing, that he is settling the matter out of court with the bank and sought for a month's time. Hence, time was accorded to the writ petitioner by the arbitrator. But, however, no such steps and measures hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas." 7. In order to attain economic stability and to save the country from a possible economic crisis, certain reforms have been contemplated. Since banks and other financial institutions have come to play a major part in lending/providing financial assistance to various sectors, including trade, commerce and industry, some of the reforms are also needed in that sector. Thus, the Central Government after a thorough and proper consideration of various aspects relating to banking sector specific reforms, has enacted Act duly taking into account the internationally prevailing practice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch debt or receivables ; or ( v )any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or ( vi )any financial assistance; ( o )"non-performing asset" means an asset or account of a borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, - ( a )in case such bank or financial institution is administered or regulated by any authority or body established, constituted or. appointed by any law for the time being in force, in accordance with the directions or guidelines relating to assets classifications issued by such authority or body ; ( b )in any other case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank ; ( zb )"security agreement" means an agreement, instrument of any other document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor ; ( zf )"security interest" means right, title and interest of any kind wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such business of the borrower which is relatable to the security for the debt ; ( c )appoint any person ("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. 10. A careful analysis of the above provision makes it clear that a secured creditor may take recourse to one or more of the following measures in the process of recovering the debt, viz., (1) take possession of the secured assets including their right to transfer by way of lease, assignment or sale, (2) takeover the management of the secured assets with a similar right of transfer by way of Lease, assignment or sale, (3) appoint a manager for managing the secured asset, upon taking over of its possession, ( 4 ) call upon a third party who has acquired any of the secured assets from the borrower, to pay so much of money which would be sufficient to liquidate the debt. Therefore, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Parliament has not contemplated fixation of any time table for achieving any or all of the steps and measures provided for, under sub-section (4) of section 13 of Act. The reasons are not far to seek. In a given situation, if a commercial enterprise or an industrial concern, is considered as a viable one and if is properly managed by a competent manager, the prospects of liquidating the entire liability from out of the profits earned from such an enterprise, if be considered as a better option, then by appointing a qualified or competent manager, the creditor is bound to manage the secured asset for a while before the necessity to take any other decision afresh by him would arise. It is but reasonable for a viable commercial enterprise to be run for at least two to three years and if the recovery process of the debt is really encouraging by such an enterprise, then perhaps the creditor may consider prolonging the same arrangement of managing the affairs of the secured asset by a further period, instead of liquidating it by way of transfer/ sale. On the contrary, even at the end of a reasonable period of tenure and notwithstanding competent and skilful management of the affairs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner then placed reliance upon the judgment rendered by the Supreme Court in Union of India v. B.S. Agarwal AIR 1998 SC 1537 wherein it has been held : "27....The court should lean in favour of such interpretation of statute which conforms to justice and fair play and prevents potentiality to injustice by liberally construing the provision without intrinsically violating the language of the statute and the purpose intended to be achieved...." 16. I consider it profitable to notice the jurisprudential principles set out in Chapter 4 of 9th edn. of N.S. Bindra's Interpretation of Statutes (Butterworths Publication) at pp. 246-248, which are set out herein : "2. Absurdity. - If the words of an Act are clear, the court must follow . them even though they lead to a manifest absurdity. The court has nothing to do with the question whether the Legislature has committed an absurdity. Reg. v. Judge of the City of London Court [1892] 1 QB 273, 290, per Lord Esher ; followed in Vacher Sons Ltd. v. London Society of Compositors [1913] AC 107, 122, per Lord Atkinson ; Corpn. of City of Victoria v. Bishop of Vancouver Island AIR 1921 PC 240, per Lord Atkinso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the court in choosing between two possible meanings of ambiguous words, it is a doctrine which has to be applied with very great care, remembering that Judges may be fallible in this question of an absurdity, and in any event it must not be applied so as to result in twisting language into a meaning which it cannot bear. It is a doctrine which must not be used to rewrite the language in a way different from that in which it was originally framed. It's a salutary principle, that, while interpreting any provision of a statute, the main purpose and thrust sought to be achieved by the statute must be advanced. The interpretation that should be placed should be such that the mischief intended to be suppressed must be achieved. Similarly, no provision of a statute should be construed in such a manner that it will result in a manifest injustice to any party. SERFEASI Act is a special statute ushered in as part of banking sector reforms to make them fall in line with international practices and standards of securitisation of the debts. The main object which is sought to be achieved by this enactment is to reign in the defaulting borrowers from deliberately delaying the obligatory repa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id a construction to allow any inconvenience which is not essential to the operation of the Act and which may in addition have adverse economic consequences. (37) It is also the principle that the court seeks to avoid a construction that creates an anomaly or otherwise produces an irrational or illogical result (see paragraph 323 of the said book). (38) It is also the principle that the court seeks to avoid a construction that cures the mischief the enactment was designed to remedy only at the cost of setting up of a disproportionate counter-mischief since this is unlikely to have been intended by the Parliament (see paragraph 326 of the said book)." in support of his contention that the disproportionate mischief, which is sought to be caused to the writ petitioner all due to the delay caused by the respondent-bank, is never intended by the Act. 18. There is no quarrel with the propositions of law enunciated in the aforesaid judgment. No enactment should ever be construed so as to cause manifest or disproportionate injustice to any party. After all, it would never have been the intention of the statute maker to cause deliberate or disproportionate mischief to any of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his liability within a reasonable period of time, provided an opportunity is held out to him without steps being initiated under sub-section (4) of section 13 and the creditor conceding such a request for the time being. We cannot also simultaneously rule out the possibility of a defaulting debtor realising the perils of his action and rectifying the same, by way of payment, at least to a substantial extent, which might convince his creditor to delay the measures contemplated under sub-section (4) of section 13 for a while. Therefore, the creditor is as much entitled to hold on from initiating the further steps and measures contained and contemplated by sub-section (4) of section 13. The delay in ultimately invoking the various measures and steps contemplated by sub-section (4) of section 13, therefore, cannot be construed as resulting in or causing a disproportionate mischief to the borrower and on that basis either strike down sub-section (4) of section 13 or declare that no such measures or steps can ever be taken after passage of considerable period of time after service of notice under sub-section (2) of section 13 of the Act. 19. Let us also look at it from a different a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract of debt. Pursuant to section 17 read with section 18 of The Recovery of Debts Act, the jurisdiction of the civil courts is ousted and the Tribunal constituted under the said Act alone has jurisdiction to recover the magnitude of debt, like in the present case. Therefore, the contention of the learned counsel for the writ petitioner that the respondent-bank cannot fall back upon the provisions contained under sub-section (4) of section 13, but must fall back upon the option of going to the civil court is a contention which disregards the provision of the Recovery of Debts Act which ousted the jurisdiction of the civil court. At any rate, any such option to fall back upon the otherwise normal mode of recovery, will be a far more time consuming affair and that would, even according to the writ petitioner, be further compounding the mischief to him. Therefore, it would be wholly in the interests of the writ petitioner to prevent the debt from escalating any further. Hence, for this reason also, we do not see any reason to interfere with the impugned notice. For all the aforesaid reasons, we do not find any merit in this writ petition and it is accordingly dismissed. No costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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