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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 ..... shown as the principal amount due and outstanding, thus, signifying that the writ petitioner has not paid any amount by way of repayment of loan to the respondent-bank. On 21st June, 2004, the respondent-bank invoked the provision available under sub-section (2) of section 13 of the Act and called upon the writ petitioner to liquidate the entire liability of Rs. 3,61,95,130, which has become due and payable as on 15th June, 2004, within 60 days from the date of receipt of the said notice. The writ petitioner has not responded to the said notice. However, since the respondent-bank is a cooperative society registered in accordance with the Andhra Pradesh Cooperative Societies Act, 1964, it has invoked the provision available under section 62 of the said Act by seeking a reference for resolution of the dispute between the parties by way of arbitration. Thereafter, the arbitrator had passed an award on 23rd January, 2003 holding the respondents as liable to pay the bank a sum of Rs. 2,20,24,114 as on 31st December, 2001 together with interest at 19.5 per cent per annum from 16th March, 2002, the date of seeking the reference till the amount is realised. Calling in question the correct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t must fall back upon the other options available for recovering the debt due by instituting the legal proceedings only before the appropriate civil court. Learned counsel would further submit that the 2nd notice issued now is intended to cause manifest injustice to the writ petitioner/borrower and it could never have been intendment of the Parliament to cause any such manifest injustice by enacting Act. Therefore, provisions of the Act are not intended to be invoked by such a defaulting banker. 3. It was further contended that a disproportionate mischief is now sought to be caused to the writ petitioner by seeking to recover a huge amount, and, hence, by invoking the provisions available under section 13 of the Act, no such disproportionate mischief should be allowed to be visited to a borrower. Elaborating this contention, the learned counsel for the petitioner would submit that when the notice was first issued on 21st June, 2004, the writ petitioner was called upon to liquidate a liability of Rs. 3,61,95,130 as of 15th June, 2004 and if only the bank had carried the matter to its logical conclusion by putting to sale the secured asset, the writ petitioner would have had the ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an issued by the 2nd respondent is fully secured and there is no risk as prime immovable property situated in no less than Abids Road, Hyderabad, fulcrum of Hyderabad city, is offered as security, the 2nd respondent has hastily taken the impugned proceedings. The auction is fixed on 16th June, 2003. In the above circumstances I request the hon'ble court to grant time of 60 days and I undertake to pay a sum of Rs. 25,00,000. Therefore, I pray that the hon'ble Tribunal to grant me stay for a period of 60 days for the payment of the abovesaid amount." But, however, the writ petitioner has not taken any measures or steps to liquidate even a part of his liability, once the threat of auction of the secured asset has receded. Thus, the learned counsel for the respondent-bank would submit that it is the conduct of the writ petitioner, which prevented the respondent-bank from realising the amount due and payable by him by liquidating the asset by way of public auction. 5. Before the rival contentions are taken up for consideration, the important circumstances that led the Parliament to enact Act need to be kept in view. 6. The Statement of Objects and Reasons of the enactment read as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appropriate to appreciate some of the important expressions found in the enactment. The expressions 'borrower,' 'default', 'financial assistance', 'financial asset', 'non-performing asset', 'security agreement' and 'security interest' have been defined in clauses (f), (j ), (k) , (l) , (o), (z), (za) and (zf) in section 2 of Act in the following manner : '(f)"borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who becomes borrower of a securitisation company or reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance ; (j)"default" means non-payment of any principal debt or interest thereon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor ; (k)"financial assistance" means any loan or advance granted o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... timacy has been accorded for enforcing the security interest by a creditor without the necessity of intervention of any court or tribunal. Sub-section (2) of section 13 mandates the creditor to demand the defaulting borrower whose debt is classified as a 'non-performing asset', to discharge his full liability within 60 days from the date of the notice. Notice must contain the details of the amount payable by the borrower and also the secured assets intended to be enforced by the secured creditor in the event of non-payment of the debt. Sub-section (4) of section 13 conferred wide range of powers on to the secured creditor and since it will have considerable bearing upon the controversy canvassed before us, we deem it appropriate to extract the said provision hereinbelow : 13. Enforcement of security interest. -.... (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely : - (a)take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et by way of sale at all. Similarly, the creditor can take over the management of the secured asset and appoint a manager for the said purpose. If within a reasonable period of time, by deploying such prudent measures of management, if the entire debt/liability can be liquidated, the secured asset need not be contemplated for transferring the same by way of sale, or lease or assignment. Therefore, the contention canvassed by the learned counsel for the petitioner that when once a notice is served by a creditor in terms of sub-section (2) of section 13 of the Act, he must invariably carry it to its logical conclusion resulting in transfer of the secured asset by way of sale, is not liable to be accepted. When a statute has provided for various options, to be explored by a creditor, it is not liable to be inferred that one of them or all of them in the same serial order as they are specified in the enactment should be explored inevitably. The statute has therefore, to my mind, left enough room for play in the joints and conferred the necessary discretion to be exercised by the secured creditor. It is certainly open to him to quickly liquidate the secured asset by transferring it by w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 13 must invariably follow, after the expiry of the 60 days period of time provided for under the said sub-section. 13. Learned counsel for the petitioner has placed reliance upon the judgment rendered by the Supreme Court in State of Uttar Pradesh v. Singhara Singh AIR 1964 SC 358 and in particular the following principle enunciated therein in paragraphs 7 and 8 in support of his contention that without following the measures and steps under sub-section (4) of section 13, no fresh notice is liable to be issued under sub-section (2) of section 13 of the Act again, by the respondent-bank. 14. The principle enunciated that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden, is a principle which is hardly attracted to the fact situation prevailing on hand. Sub-sections (2) and (4) of section 13, along with the rest of the provisions of the Act, are read together, what follows is that no measures contemplated under sub-section (4) of section 13, for enforcing the secured asset of the borrower should be taken without first putting the borrower on a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law is to prevent a brooding sense of injustice. It is not the words of the law but the spirit and eternal sense of it that makes the law meaningful. The letter of the law is the body but the sense and reason of the law is the soul ;.... Words are the skin of the language. The language gives its own meaning and interpretation of the law. It does so employing appropriate phraseology to attain the object of legislative policy which it seeks to achieve. Pannalal Bansilal Pitti v. State of Andhra Pradesh [1996] 2 SCC 498. The cardinal rule of construction of statutes is to read the statute liberally, that is, by giving to the words used by the Legislature, their ordinary, natural and grammatical meaning ; if, however, such a reading leads to absurdity and the words are susceptible of another meaning, the court may adopt the same ; but if no such alternative construction is possible, the court may adopt the ordinary rule of literal interpretation. Veerappa v. State of Mysore AIR 1965 Mys. 227, 229 (FB), per Hegde, J. It matters not in such a case what the consequence may be. When by the use of clear and unequivocal language capable of only one meaning anything is enacted by the Leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 13. Any such interpretation would in fact result in manifest injustice to the banks and financial institutions and that should be avoided. 17. Learned counsel for the writ petitioner has placed strong reliance upon the judgment rendered by a Division Bench of the Calcutta High Court in Anil Kumar Panda v. State AIR 1997 Cal. 125 and in particular on the following passages : "(31) It is one of the principles of legal policy that law should be just and the court's decision should further the ends of justice. (32) Lord Reid, in Courts & Co. v. IRC 1953 AC 267, had held : "in general if it is alleged that a statutory provision brings about a result which is so startling, one looks for some other possible meaning of the statute which will avoid such a result, because there is some presumption that Parliament does or intend its legislation to produce highly inequitable results." (33) The court, while considering a provision of a statute must have regard to the consequences of such construction. (34) It is well-settled principle that the court seeks to avoid a construction of an enactment that produces an unworkable or impracticable result, since this is unlikely to have been in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by the Act to any hostile treatment, so long as their debt or their account does not become a non-performing asset. In other words, if the terms of the contract are adhered to by them, there will be no occasion for any action in terms of section 13 of Act to spring up. Therefore, the Act which conferred certain special protective measures upon the creditors by way of the provisions contained under section 13 of the said Act are clearly intended to deal with such class of debtors or debts, classified as NPAs. There again, no debt or no account of a debtor is liable to be classified as a NPA without duly following the guidelines framed by the RBI in that respect. Therefore, great exercise of care is liable to be carried out before an asset is declared as a NPA. Until and unless the debt or account is declared as a NPA, the drastic measures contemplated by section 13 are not liable to be initiated. In other words, section 13 gets attracted only to such cases where the debtor becomes a defaulting debtor. Such a defaulting debtor cannot be allowed to say that his interests far outweigh than that of his creditor. The balance that has got to be struck in between them, to my mind, has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod of time is allowed to lapse before measures under sub-section (4) of section 13 are initiated, cannot be completely lost sight of either. All these aspects are in the realm of speculation. Sometimes, it may work to the advantage of a borrower if certain time is allowed to pass by or sometimes it may even work against his interests. Therefore, only on the ground that the debt keeps mounting in the meantime, we will not be able to arrive at a definite conclusion that a disproportionate mischief is bound to be caused to the borrower all due to passage of time, after service of notice under sub-section (2) of section 13. 20. However, in the instant case, the conduct of the writ petitioner which lulled the respondent-bank into a some kind of hybernation is a factor which has its own role in contributing to the delay in taking measures by the respondent-bank under sub-section (4) of section 13. Therefore, any intervention by us at this stage would only be putting a premium to such a conduct of the writ petitioner. Hence, for this reason also, we refrain from interfering with the impugned notice. 21. Finally, the respondent-bank has advanced a loan of Rs. 1.75 crore to the writ pet ..... X X X X Extracts X X X X X X X X Extracts X X X X
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