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TMI Blog2007 (12) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... despite the efforts of the petitioner to regularise it and, hence, the petitioner declared the account of the respondents as Non Performing Asset (for convenience, "NPA") on 31/3/2005. 5. According to the petitioner, on the date of declaring the account of the respondents as NPA, the outstanding amount payable by the respondents to the petitioner was Rs.1,59,79,4607-with further interest at contractual rate w.e.f. 1/4/2005 with Churchgate Branch and Rs.38,44,738.91 with further interest at contractual rate w.e.f. 1/1/2005 with Queens Road Branch of the petitioner. 6. After declaring the account of the respondents as NPA as on 31/3/2005 for the sake of recovering the outstanding amount, the Bank initiated proceedings under the Securitization and Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 (for convenience, "the NPA Act"). Churchgate Branch of the petitioner issued notice dated 7/4/2005 and the Queens Road Branch issued notice dated 11/6/2005 to the respondents under section 13(2) of the NPA Act and demanded the payment of the outstanding amount and warned the respondents that if they failed to repay the loan, they would proceed further under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he respondents have not done so. The application was, therefore, barred by limitation. The DRT dismissed the application. 11. The respondents carried an appeal to the Debts Recovery Appellate Tribunal (for short, "the DRAT"). The DRAT held that the possession contemplated under section 13(4)(a) of the NPA Act cannot be other than actual possession. Under section 17, a borrower may be aggrieved by any of the measures taken under section 13(4) of the NPA Act. The borrower may not be aggrieved by the issuance of a notice under section 13(2) of the NPA Act, but he may be aggrieved by the taking of physical possession as in that case, he is dispossessed from his property. The DRAT further observed mat an effective action can be taken by a secured creditor only after actual possession is taken. Hence, a borrower has a right to file appeal under section 17 of the NPA Act within 45 days from the date of taking physical possession. The appeal was thus allowed. The DRAT remanded the matter to DRT for disposal in accordance with law. Being aggrieved by this judgment and order, the petitioner-bank has filed this writ petition. 12. Mr. Khanavkar, learned counsel appearing for the petitioner-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the borrower over the secured assets becomes unwarranted by law and the same is not even protected by law. This is the reason why, on making a request to the learned Chief Metropolitan Magistrate/District Magistrate, the bank gets physical (de facto) possession of the secured assets as a matter of right. This is further justified by the fact that under the proceedings under section 14 of the NPA Act, there is no adjudication provided and it is mandated that the learned Chief Metropolitan Magistrate/District Magistrate should assist the bank !n taking forcible possession of the property as a matter of right by passing an administrative order. Therefore, at the most, the only right existing with the borrower after the bank takes de jure possession is the right not to be dispossessed forcibly from the secured assets without following due process of law. And the said due process of law is followed by the bank by taking the assistance of the learned Chief Metropolitan Magistrate/District Magistrate under section 14. 16. Mr. Khanavkar reiterated that since after taking de jure possession of the property, the borrower has no right in the secured asset, there can be no infringement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1883 are not applicable to any local or special statutes if the special statute expressly bars the application thereof. Section 35 of the NPA Act expressly bars the application of any Act that is in force for the time being and the same beyond doubt includes the Limitation Act. He submitted that while following (2001) 8 SCC 470. the Supreme Court has in Fairgrowth Investments Ltd. v. Custodian [2004] 11 SCC 472 held that 'exclusion' includes 'exclusion by necessary Implication'. The Supreme Court has held in the said case that since section 13 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 provides that the provisions of that Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force ...' and, hence, the provisions of the Limitation Act would have no application though the said special statute provides for a period of limitation other than what has been provided for in the schedule to the Limitation Act. Mr. Khanavkar submitted that since section 35 is similar to section 13 of the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 on the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session. While interpreting provision of any law, every word has a connotation and significance. The words "including the right" in sub-clause (a) would not have been necessary if the legislature would have contemplated only one stage in section 13(4)(a). Mr. Bulchandani submitted that the manner in which secured asset is to be dealt with is provided under rules 8 and 3 of the said Rules. These rules envisage different stages/steps to be followed; first symbolic possession [rules 8(1) and (2)], then physical/actual possession [rules 8(3) and (4)] and then proceeding to sell the secured asset [rules 8(5) and (6) read with rule 9(9)]. These steps/stages are in aid of taking the measures for possession and selling the property. Rule 9(9) therefore provides that the authorized officer shall deliver the property to the purchaser free from encumbrances. Compliance of these Rules is open to scrutiny by DRT under section 17(2) and in the event the measures taken by secured creditors are not in accordance with the provisions of the NPA Act and the said Rules, the borrower is entitled to restoration of possession of the secured asset under section 17(3) Therefore, rules 6(1) and (2), then ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim nor on quantum of claim raised by the secured creditor at that stage. Only after "taking of possession" by the secured creditor, rights accrue to the borrower to file application challenging at that stage, declaration of his account as NPA and the claim of secured creditor including the quantum of claim. Section 17 therefore cannot render the borrower remediless, in the event, borrower chooses not to file an application after receipt of possession notice under section 13(4)(a) read with rule 8(1). Remedy will also be available to the borrower, if the borrower is aggrieved by the takeover of actual possession after symbolic possession or by notice of sale. All these stages therefore give rise to a separate cause of action which would be subject to the limitation period of 45 days commencing from each stage. 24. So far as application of Limitation Act is concerned, Mr. Bulchandani contended that section 37 of the NPA Act provides that application of other laws shall not be barred and that the provisions of the NPA Act or the said Rules shall be in addition and not in derogation of any other law for the time being in force. Section 36 of the NPA Act makes the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, there is no substance in the contentions raised by the petitioner and, hence, the petition be dismissed. 31. Two important questions fall for considerations of this court. They are: (a)From which point does the period of limitation of 45 days prescribed in section 17 of the NPA Act start running; from the date on which symbolic possession is taken or from the date on which actual possession is taken. (b)Whether and to what extent the Limitation Act, 1963 is applicable to the proceedings under section 17(1) of the NPA Act? 32. Both steles have heavily relied on the judgments of the Supreme Court in Mardia Chemical's case (supra ) and Transcore's case (supra). To find answers to the above questions, it is necessary to see what led to the enactment of the NPA Act and how various provisions thereof are interpreted by the Supreme Court in the above judgments. 33. The DRT Act was enacted to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions considering the huge pendency of cases filed by the banks and financial Institutions for recovery of debts. In Transcore's case (supra). the Supreme Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (for short, the Amendment Act") the said condition was deleted. 37. While upholding the constitutional validity of the rest of the NPA Act, the Supreme Court observed that in cases where the secured creditor has taken action under section 13(4) of the NPA Act, It would be open to the borrower to fife an appeal under section 17 of the NPA Act within the limitation as prescribed therein. The Supreme Court also observed that if the borrower, after service of notice under section 13(2), raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and reasons for not accepting the objections, however brief they may be, must be communicated to the borrower because he cannot be denied the right to know the reasons for non-acceptance of his objections before the drastic measures under section 13(4) are taken against him. The Supreme Court clarified that as per the provisions of the NPA Act, the borrower may not be entitled to challenge the reasons communicated to him or the likely action of the secured creditor at that point of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich any measures are taken under section 13(4) till the date of sale/auction of the property. Obviously, therefore, after sale, there can be no appeal. 40. The Supreme Court negatived the contention that because remedy under section 17 is available, only after measures under section 13(4) are taken, it is illusory. The Supreme Court described this remedy as the initial action where grievance can be raised against the action or measures taken by one of the parties to the contract. The Supreme Court clarified that proceedings under section 17 are in lieu of a civil suit. 41. In Transcore's case (supra), the Supreme Court was considering whether the NPA Act is an additional remedy to the DRT Act or whether the doctrine of election applies to the remedies provided under both the Acts. While holding that doctrine of election has no application because there is no repugnancy between the two Acts, the Supreme Court considered whether recourse to take possession of the secured assets of the borrower in terms of section 13(4) of the NPA Act, comprehends the power to take actual possession of the immoveable secured assets. 42. It was, Inter alia, argued before the Supreme Court on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(4)). (vii )Provision for time of sale, issue of sale certificate and delivery of possesion, etc is made in rule 9. (viii )Though rule 8 refers to sale of immoveable secured assets, it dealt with the stage anterior to the issuance of sale certificate and delivery of possession under rule 9. (ix )Recourse to take possession of the secured assets of the borrower under section 13(4) of the NPA Act comprehends the power to take actual possession of the secured assets, (x )There is no dichotomy between symbolic possession and actual possession. (x )Any transfer of secured assets after taking possession or after taking over management of business under section 13(4) by the secured creditor vests in the transferee all rights in relation to the secured assets. This is because thereafter assets vest in the secured creditor free of all encumbrances (section 13(6)). (xii )If the dues of the secured creditor together with the costs, etc are tendered to the secured creditor before the date fixed for sale/transfer, the secured assets shall not be sold or transferred by the secured creditor (section 23 (8)). (xiii) The provisions as contained under sections 13 and 17 of the NPA Act provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n any manner, the moment notice under section 13(2) is issued. Since after any of the measures contemplated under section 13(4) are taken, the property vests in the secured creditor, he can pass on a dear till(r) to the transferee. Therefore, the moment ft(r) measures under section 13(4) are taken, the right, title and interest which the borrower had in the secured assets gets extinguished. 46. Section 17 gives right to the borrower to file an application before the DRT within 46 days from the date on which such measures are taken under section 13(4). it is necessary to quote section 13(4) of the NPA Act. It reads thus: "3. Enforcement of security interest - (1)xxx xxx xxx (2)xxx xxx xxx (3)xxx xxx xxx (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 realising the secured asset; [(b) take over the management of the business of the borrower including the right to tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to put the clock back by restoring the status quo ante. Thus, possession car be restored to the borrower if he is dispossessed not in accordance with the provisions of the NPA Act and the said Rules. 51. In our opinion, in the light of the observations of the Supreme Court in Mardia Chemical's case ( supra) and in Transcore's case (supra) , the conclusion is Irresistible that though the proceedings before the DRT are in the nature of civil suit, the DRT cannot entertain a debate on the question whether the debt has become due or not because the NPA Act proceeds on the basis that the liability is crystallized and the debt has become due. The moment action under section 13(4) is taken, security interest is also created in the secured assets. The DRT Act can obviously consider whether possession of the secured assets is taken in accordance with the NPA Act and the said Rules. This is more so because if the secured creditor is required to approach the Chief Metropolitan Magistrate/District Magistrats, as the case may be, under section 14 of the NPA Act for help to take actual possession, notice is not required to be given to the borrower. He is not required to be heard (See T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and (6) read with rule 9(9) refer to sale of secured assets. These steps according to him are in aid of taking the measures for possession and selling the secured assets and, therefore, rules 8(1) and (2), rules 8(3) and (4) and rules 8(5) and 9(6) contemplate accrual of cause of action at those stages. 55. We are unable to agree with his submission that rules 8(3) and 8(4) and rules 8(5) and 9(6) contemplate accrual of cause of action at those stages or that they are sub-measures for taking possession. Such a view will frustrate the object of the NPA Act viz. enforcement of security interest. We have already observed that taking over possession of the secured assets and sale of the secured assets are two different and distinct concepts. Since the security interest is created in the secured assets, the borrower after possession is taken over, having lost his right, title and interest has no locus to challenge the sale. Undoubtedly, rule 8 contemplates a notice of sale to the borrower. Rule 8(1) also contemplates a notice to the borrower. Rule 9 says that if the authorized officer fails to obtain a price higher than the reserved price, he may with the consent of the borrower and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dichotomy between symbolic possession and actual possession, the borrower can file an appeal within 45 days from the date on which the actual possession is taken. It is true that even if actual possession is taken, En an appeal filed within limitation after symbolic possession is taken, the ORT can put the clock back and restore possession to the borrower if it is not taken in accordance with the NPA Act and the said Rules. But, take a case where the secured creditor takes only symbolic possession but for a period of 45 days thereafter, he does not take actual possession on account of lethargy or any other reason and also because in any case after symbolic possession is taken, the borrower cannot sell the property. There may be settlement talks which may fall after expiry of 45 days. In such a case if after expiry of 45 days' from the date when symbolic possession is taken actual possession is taken, can the borrower be remedy-less? If it is held that 45 days' period of limitation has expired after symbolic possession is taken, then the borrower will have no remedy to make a grievance that the possession is not taken in accordance with the provisions of the NPA Act and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved as under: "If on an examination of the relevant provisions, it is clear that the provisions of the Limitation Act are necessarily excluded, then the benefits conferred therein cannot be called in aid to supplement the provisions of the Act". The Supreme Court further observed as under: "Even in a case where the special law does not exclude the provisions of sections 4 to 24 of the Limitation Act by an express reference, it would nonetheless be open to the court to examine whether and to what extent the nature of these provisions or the nature of the subject matter and scheme of the special law exclude their operation". 62. In Mangu Ram's case (supra) the Delhi High Court was considering section 417(3) of the Code of Criminal Procedure 1989. The Delhi Municipal Corporation had made an application to the Delhi High Court under section 417(3) for special leave to appeal from order of acquittal. Section 417(4) required that the application should be made before the expiry of sixty days from the date of order of acquittal. There was delay in filing application. The Corporation, therefore, made an application for condonation of delay invoking section 5 of the Limitation Act, 1983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court was concerned with the Arbitration Act as in Popular Construction Company's case (supra). The question which fell for consideration was whether section 14 of the Limitation Act is applicable to the Arbitration Act. In that case, the Sole Arbitrator declared Award in favour of the Claimant and against the State of Goa. A petition was filed before the Civil Court, Civil Judge, Margao under sections 30 and 53 of the Arbitration Act, 1940. An objection was raised that since the Arbitration Act had came into force, the Civil Court had no jurisdiction to entertain the proceedings under the Arbitration Act, 1990. The CM! Judge.. Senior Division, held that the Arbitration Act, 1990 was not applicable. He disposed of the proceedings. State of Goa filed proceedings before the District Judge, South Goa with an application under section 14 read with section 5 of the Limitation Act, 1963 for condoning delay. It was contended that time which was spent in prosecuting proceedings before the Civil Judge, Senior Division, may be excluded while calculating the period of limitation. That application was rejected. Appeal carried from this order was dismissed by the High Court. The High Court's o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof or the limitation, If any, contained therein, with particular reference to the intention of the legislature as well found expressed therein. There is no such thing as any inherent power of court to condone the delay in filing proceedings unless the law warrants and permits it. Mr. Khanavkar pointed out that in the Maharashtra Rent Control Act, there is no express provision making Limitation Act inapplicable to it yet the Supreme Court considered the case on the principles enunciated by It and held that the competent authority had no power to condone delay in filing of an affidavit with grounds of defence and application for leave to contest under section 43(4)(a) thereof. 67. In Fairgrowth's case (supra) . the Supreme Court was dealing with section 4(2) of the Supreme Court (Trial of Offences Relating to Transactions in Securities) Act, 1992, (for short, "the said Act"), which prescribed a time limit for filing objections. It was argued that section 29(2) of the Limitation Act would be automatically applicable to all special Acts such as the said Act as the said Act provided for a period of limitation different from the period prescribed under the Limitation Act, 1963 end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law which prescribes a different period of limitation for any suit, appeal or application and, (ii) the special or local law does not expressly exclude those sections (Union of India v. Popular Construction Company (supra). (e)A mere provision of a period of limitation in howsoever peremptory or imperative language is not sufficient to displace the applicability of section 5. (f)If on an examination of the relevant provisions of the special law, it is clear that the provisions of the Limitation Act are necessarily excluded then the benefits conferred therein cannot be called in ald to supplement the provisions of the Special Act. (g)Where the special law does not exclude the provisions of sections 4 to 24 of the Limitation Act by an express reference, It would nonetheless be open to the court to examine whether and to what extent the nature of the provisions or the nature of the subject matter and the scheme of the special law exclude their operation. (h)If the Special Act and the Limitation Act can be read harmoniously without doing violence to the words used therein then there is no prohibition in doing so. [State of Goa v. Western Builders (supra).] 68. In this case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uided by the principles of natural justice and shall have power to regulate its own procedure. Under the said section, Debts Recovery Tribunal, Maharashtra & Goa Regulations of Practice, 2003 have been enacted. Under Regulation 3(7), "Interlocutory application" Inter alia means application for condonation of delay. 74. Section 24 of the DRT Act states that the provisions of the Limitation Act, 1963 shall, as far as may be, apply to an application made to a Tribunal. In Transcore's case (supra ), the Supreme Court has, after considering the statement of objects and reasons of the NPA Act, the scheme of the NPA Act and the nature of its provisions, held that the enactment of NPA Act is not in derogation of the DRT Act. Their object is recovery of debts by non-adjudicatory process and they provide cumulative remedies to the secured creditor. In fact, section 37 of the NPA Act states that the provisions of the NPA Act shall be in addition to and not inderogation to the DRT Act. If we examine the relevant provisions of the NPA Act and the observations of the Supreme Court in Transcore's case (supra), the conclusion is irresistible that section 5 of the Limitation Act is applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uires DRT to dispose of an application within 60 days from the date of the application. Under proviso thereof, DRT can extend the said period for reasons to be recorded in writing but the total period of the application shall not exceed four months from the date of the application. If the application is not disposed of by the DRT within four months, any party to the application may make an application to the DRAT for appropriate direction to the DRT for expeditious disposal and the DRAT shall make an order for expeditious disposal. In the light of the settled legal principles as regards applicability of the Limitation Act and in the Interest of Justice, we have held that section 5 of the Limitation Act is applicable to the proceedings under section 17 (1) of the NPA Act. However, while dealing with applications for condonation of delay, the DRT must bear the scheme of the NPA Act in mind and should not allow any person to procrastinate the proceedings by making frivolous applications for condonation of delay. 77. The above discussion leads us to the following conclusions: (a)Forty-five days' period of limitation prescribed under section 17(1) of the NPA Act starts running from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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