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TMI Blog2009 (7) TMI 1389X X X X Extracts X X X X X X X X Extracts X X X X ..... : The petitioner in W.P. No. 9043 of 2009 is M/s. Kathikkal Tea Plantations, represented by its Managing Director. The petitioner had availed a loan from the 1st respondent bank by mortgaging the property viz., the land measuring to 1.7 acres in R.S. No. 163/3, 161, 210/1B, 210/2, 233/2, 121/10, 121/1, 372/3, 68/2C2 in Kengarai Village, Kotagiri Taluk, Nilgiris District and another 8.74 acres in R.S. No. 202/2, 203/1, 203/2A1 and 457/4 in Konavakorai Village, Kotagiri Taluk, Nilgiris District. Since there was a default in making payment to the respondent bank by the petitioner, the debt is classified as 'non-performing asset' and the respondent bank had issued notice on 27.01.2006 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the Act ) to discharge the liability to the bank within sixty days from the date of notice. Subsequently, on failure to discharge the liability in full by the petitioner, as required under Section 13(4) of the Act, the respondent bank had issued a possession notice under Section 13(4) on 11.12.2006 to the petitioner. Pursuant to the said notice, the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pursuant to a lease agreement entered into between the writ petitioner company and the said Merit International Education Foundation. But the Directors of both the firms are one and the same. Hence, the 1st respondent bank filed an application under Section 14(1) in Crl.M.P. No. 141 of 2009 as against the writ petitioner and its directors and also the lessee before the Sessions Judge, Udhagamandalam, seeking necessary police protection to take possession of the secured property and the permission sought was also granted by order dated 29.04.2009. Aggrieved over the same, the petitioner company has filed the present writ petition to set aside the order passed by the learned Sessions Judge, Udhagamandalam. 5. In view of the bone of contentions raised by the borrowers in the respective writ petitions, the questions which have now arisen for consideration before this Court are, whether the respective banks are legally entitled to take physical possession of the properties after issuance of the sale certificates in favour of the auction purchasers and as a follow up action, whether the respondents banks can maintain an application under Section 14(1)(2) of the Act before the concerne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the same in favour of the transferee with all rights as if the transfer had been made by the owner of such secured asset. But, in the instant case, the bank took only a symbolic possession or constructive possession by issuing a notice under Section 13(4). The actual physical possession of the property was not taken by the bank and the borrower/secured debtor was not actually dispossessed but they were allowed to be in de facto possession of the property. After bringing the property in public auction and after issuing the sale certificate as per Rule 9(6) and confirming the sale in favour of the successful bidder in the form prescribed under Appendix V of SARFAESI Rules, the respondent bank initiated action to dispossess the borrower from the property and sought the assistance of police by filing an application under Section 14(1)(2) of the SARFAESI Act. Aggrieved over the said action of the bank, the borrower/writ petitioner now has raised a dispute that once the sale certificate was issued in favour of the auction purchaser of the property, there is no secured debt and the bank also loses the character of secured creditor. Therefore, the question of 'actual taking physical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Counsel that the secured creditor ought to have taken extra care to take actual physical possession at the time of issuing notice itself under Section 13(4) because Section 13 specifically says that the property can be transferred only after taking possession. Therefore, the practice adopted by the banks by taking symbolic possession or constructive possession, and then completing the entire proceedings by issuing a sale certificate, cannot resort to take physical possession of the property. Learned Counsel for the petitioner also relied on a judgment reported in Transcore v. Union of India and Anr. 2006 (5) CTC 753 in support of his contention that the banks are entitled to take the actual possession of the secured assets from the borrower or from any other person in terms of Section 13(4) of the SARFAESI Act and the bank shall vest in the transferee all rights in relation to the secured assets as if the transfer has been made by the owner of such secured assets. Any party aggrieved by such dispossession, can take recourse to approach the Debts Recovery Tribunal under Section 17(4) of the SARFAESI Act. If the party is dispossessed, not in accordance with the provisions of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 13(10) of the SARFAESI Act states that where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditors may file an application in the form and manner as may be prescribed in the Debts Recovery Tribunal. Thus, by reading relevant provisions under Section 13(10), one could understand that the secured creditor remains as secured creditor and he does not cease to be so by executing a sale certificate. In support of his contention, the learned Counsel relied on a plethora of decisions and further contended that Section 14(1) should not be read in isolation and it has to be a combined reading along with Sections 13 and 14 to have a correct interpretation. 10. Learned Counsel appearing for the proposed party in W.P. No. 9043 of 2009 submitted that the writ petitioner, who has not repaid the loan amount, is not entitled for any discretionary remedy under Article 226 of Constitution of India. The mortgagor, who continues in possession of the property, in spite of creating a charge over the property in favour of the bank, ought not to be allowed to continue in possession and squat on the property. The sale certific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssignment or sale for realising the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security of 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. Section 13(6) reads as follows: Any transfer of secured asset after taking possession thereof or tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Now, the contention of the writ petitioners is that the banks ought to have taken due care while taking recourse to the measures provided under Section 13(4) itself to recover their secured debt. Once the sale certificate was issued and the money was recovered, the purpose is over and therefore, it cannot be termed as a 'secured creditor' and the property cannot be a 'secured debt'. Hence, the banks cannot take actual physical possession after issuance of the sale certificate by seeking assistance from the Magistrate under Section 14(1). The submissions of the learned Counsel for the petitioners are based on the language employed in Section 14(1), namely, the secured creditor and secured debt. Section 2(zc) defines 'secured asset' means the property on which security interest is created; Section 2(zd) defines 'secured creditor' as follows: 'Secured creditor' means any bank or financial institution or any consortium or group of banks or financial institutions and includes- (i) debenture trustee appointed by any bank or financial institution; or (ii) securitisation company or reconstruction company, whether acting as such or man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e authorised officer shall deliver the property to the buyer free from all encumbrances known to the secured creditor or not known to the secured creditor. (emphasis supplied) Section 14 of the NPA Act states that where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred, the secured creditor may, for the purpose of taking possession, request in writing to the District Magistrate to take possession thereof. Section 17(1) of the NPA Act refers to the right of appeal. Section 17(3) states that if DRT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under Section 13(4) taken by the secured creditor are not in accordance with the provisions of the Act, it may by order declare that the recourse taken to any one or more measures is invalid, and consequently, restore possession to the borrower and can also restore management of the business of the borrower. Therefore, the scheme of Section 13(4) read with Section 17(3) shows that if the borrower is dispossessed, not in accordance with the provisions of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules. 16. From the above, the submission made by the learned Counsel for the respondents that Section 14 of the Act cannot be read in isolation and has to be viewed in the context of all other provisions of the Act, such as Sections 13 (4), (6), (8), 15, 17, 18 Rule 8(9) of SARFAESI Rules and Section 55 of the Transfer of Property Act is acceptable. These provisions are in conjunction with Section 14 of the Act for the purpose of interpretation, to be adopted, to achieve and sub-serve the object of the SARFAESI Act. Any other approach or interpretation will defeat the object of the Act. The object of the Act is only to enable the secured creditor, financial institutions to realise the long term assets, manage problems of liquidity, asset liability mis-match and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. Therefore, it could be understood that the Act was brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to a secondary situation so as to best serve the same purpose as the primary statutory intention does in relation to a primary situation. 9. So we see that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the court must then strive to so interpret the statute as to promote or advance the object and purpose of the enactment. For this purpose, where necessary the court may even depart from the rule that plain words should be interpreted according to their plain meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be well justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing the written word if necessary. 18. The relevant passage from the said decision (1992)1 SCC 361 is as follows: 4. It seems to us that the High Court had a mechanical approach to construction. The mechanical approach to construction is altogether out of step with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nical way of interpreting the provisions made in the statute will lead to defeat the object of the Act. Here, when the object is to speedy recovery of debt, by way of taking possession on transferring the property in favour of third party and issued a sale certificate, it cannot be contended that once the sale certificate is issued, physical possession cannot be taken by the secured creditors. Further, in this regard, a useful reference could be placed on the judgment reported in Kottakkal Co-op. Urban Bank Ltd. v. Balakrishnan 2008(2) KLT 456. In that case, after taking a symbolic possession under Section 13(4) and selling the property in favour of the auction purchaser, the secured creditor approached the Chief Judicial Magistrate seeking the assistance for taking possession. The petition filed by the secured creditor under Section 14(1) was dismissed by the Magistrate holding that that the provision contained in Section 14 only enables the secured creditor to seek assistance of Court to take possession or control of property for effecting sale. Since the secured creditor had taken possession, effected sale and issued sale certificate, the provision cannot be invoked. Aggrieved o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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