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TMI Blog2019 (1) TMI 2055X X X X Extracts X X X X X X X X Extracts X X X X ..... s Recovery Tribunal, Nagpur (hereinafter referred to as "DRT" for short), were dismissed. 2 As these writ petitions arise out of the common order passed by the DRAT and background facts are also identical, we deem it appropriate to dispose of both these writ petitions by this common judgment and order. 3 For the sake of clarity and convenience, it would be apposite to enumerate the facts in OA No. 31 of 2010 and S.A. No. 119 of 2012, distinctly. FACTS IN OA NO. 31 OF 2010 i) The Bank of India, the predecessor in-title of M/s. Phoenix ARC Pvt. Ltd., (the Petitioner herein) had extended certain financial facilities to M/s. Sunil Solvent Extraction Limited Defendant No.1; a private limited company, which came to be subsequently converted into a public limited company. The Defendants Nos. 2 to 8 had stood guarantor to the said loan / financial facility extended to Defendant No. 1. ii) The Defendants committed default in repayment. The Bank of India declared the loan and financial facilities extended to the Defendants, as nonperforming assets. Thereupon action under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the meanwhile, settlement was arrived at between the petitioner and respondent and it was agreed that the loan accounts shall stand settled upon payment of Rs. 1.13 crores. However, despite payment of a sum of Rs. 73, 00,000/ by the respondent, the settlement could not materialize on account of certain disputes. The Petitioner issued a notice on 08.11.2012 to sell the secured assets by way of public auction. Auction notice followed on 24.11.2012. The Respondent thus filed securitization application no. 119 of 2012, challenging the proposed sale of the secured assets by the Petitioner. ix) The main grounds of challenge were that the secured asset consisted of agricultural land bearing Gat No. 276/2 and it could not have been sold under the provisions of the SARFAESI Act. Secondly, the Petitioner failed to observe the mandatory 30 days period of notice under the provisions of Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the said Rules 2002"). Thirdly, the Petitioner failed to comply mandatory provisions of Rule 8(2) of the Rules 2002 which warranted that the notice of taking possession of the secured assets shall be published in newsp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the DRAT did not find any fault with the order passed by the DRT in SA No. 119 of 2012. 4 We have heard Mr. Charles D'Souza, learned counsel for the Petitioner and Mr. Atul Pande, learned counsel for the Respondent, at considerable length. 5 The arguments were concluded on 02.11.2018. However, liberty was granted to both the parties to file written submissions by 16.11.2018. The Petitioner has tendered written submissions in both the matters. The Respondents have also tendered the Written Notes of Arguments in both the matters. We have perused the Notes of Arguments tendered on behalf of the Petitioner and the Respondents. 6 To begin with, few uncontroverted facts : The Bank of India was the original secured creditor. On account of default in repayment, the debts were declared non performing assets by the Bank of India on 31.12.2009. The Bank of India initiated action for enforcement of the security interest under the SARFAESI Act. A notice under section 13(2) of the Act was issued on 19.01.2010. The borrowers failed to discharge their liability within the period specified in sub section (2) of section 13. The Bank of India took possession of the secured assets, under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant subrules of Rule 8 of the Rules, 2002. They read as under: "8. Sale of immovable secured assets - (1) where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) [The possession notice as referred to in subrule (1) shall also be published, as soon as possible but in any case not later than seven day from the date of taking possession, in two leading newspapers], one in vernacular language having sufficient circulation in that locality, by the authorised offer." 10 Learned counsel for the Petitioner submitted that a conjoint reading of the aforesaid provisions would indicate that following steps are mandatory : (i) Issue and delivery of possession notice to the borrower, (ii) Affixing the possession notice on the outer door or other conspicuous place of the secured assets. (iii) Publication of the possession notice in two leading newspaper. However, according to the learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct has to be done does not constitute a prescription of a period of limitation, a failure of compliance with which would render the action invalid. The object of subsection (3A) is to provide an expeditious method for the disposal of objections in order to ensure that the action of the secured creditor is not held up for an unduly long period of time. The period of one week that is prescribed in sub section (3A) is clearly directory. That apart, the Petitioners have not established that any prejudice was caused to them by the delay on the part of the Bank in responding to the representation submitted to the notice under Section 13(2). That submission must therefore fail." 13 Learned counsel for the Petitioner urged that the aforesaid analogy applies with equal force to the construction of Rule 8(2) of the Rules, 2002. Publication of the possession notice is indisputably mandatory. However, the period of seven days from the date of taking possession prescribed for publication, is directory. 14 Reliance was also placed on the judgment of the Supreme Court in the case of Topline Shoes Ltd. vs. Corporation Bank, (2002) 6 SCC 33 wherein it was enunciated that section 13 of the Consume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note that the learned Presiding Officer, DRT, recorded that initially the possession notice dated 31.03.2011 was not placed on the record of the Tribunal and it came to be filed on 26.03.2014 along with pursis. It would be contextually relevant to note that the said possession notice dated 31.03.2011 was even not tendered along with the petition and the petitioner placed its copy before this court. It must be noted that the Respondent did not dispute the correctness of the said copy. 18 After perusal of the said possession notice dated 31.03.2011, the learned Presiding Officer, DRT observed that the said notice did not partake the character of possession notice, as contemplated by section 13 (4) of the SARFAESI Act. Following observations in para 6 of the judgment and order dated 27.03.2014 in S.A.No.119 of 2012, would make the view of the Presiding Officer, DRT, explicitly clear : ".... .... From perusal of photocopy of said notice, nowhere it is written that it is issued to the applicant / appellant, nowhere it is mentioned that it is notice under section 13(4) and from the entire perusal of the said notice it cannot be considered as notice issued under section 13(4) of SAR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stratum of the petitioner's case, as there is total non compliance with the statutory requirement. An attempt made on behalf of the Petitioner to wriggle out of the situation, by publishing the notice dated 31.03.2011 in the newspapers on 11.04.2011, is of no avail. It must be noted that the learned Presiding Officer, DRT, did not negative the claim of the Petitioner only on the premise that there was delay of 4 days in publishing the notice dated 31.03.2011. In fact, the substantive reason was that the notice dated 31.03.2011, did not acquit itself as a statutory notice, contemplated by section 13(4) of the SARFAESI Act. 23 At this juncture, a profitable reference can be made to the judgment of the Supreme Court in the case of Mathew Varghese vs. M. Amritha Kumar & Ors. (2014) 5 Supreme Court Cases 610, wherein the question of validity of sale of secured assets without 30 days' clear notice to borrower fell for consideration. The Supreme Court after adverting to the provisions of section 13 of the SARFAESI Act and Rule 8 of the Rules 2002, observed that while on the one hand secured creditor may be entitled to enforce the secured asset created in its favour on its own wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are persuaded to hold that though the secured creditor has been statutorily empowered to enforce the security interest without intervention of the Court or the Tribunal, yet the statutory provisions prescribing the manner in which the security interest is to be enforced, are required to be scrupulously observed. If the provisions of Section 13(4) of the SARFAESI ACT are read in juxtaposition with Rules 2002, especially sub-Rule (1) to (4) and (6) of Rule 8 and sub-Rule (1) of Rule 9, it becomes explicitly clear that the secured asset, upon its turning into a non performing asset, cannot be dealt within a highhanded manner and disposed of in a casual manner, without adhering to the procedure prescribed by the Act and Rule 2002. 26 For the forgoing reasons, we are impelled to hold that the in the facts and circumstances of the case, the abstract question as to whether the provisions of Rule 8(2) of the Rules, 2002, qua the time limit for publication of notice are mandatory or directory, does not warrant determination. It is evident that the possession notice dated 13.04.2010 was not published in the newspaper, as is envisaged by Rule 8(2). Thus, there is total noncompliance of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs. 40,00,000/ (Rupees Forty Lakhs only) to the Applicant out of the agreed Settlement Amount. The Consenting Defendants, jointly and severally, further agree that failure of paying the said amount on or before 31st July 2011 would be treated as an 'Event of Default', whereby the entire Settlement Amount along with further interest as per the terms of settlement shall become due and payable forthwith by the Consenting Defendants to the Applicant. h. The Consenting Defendants, jointly and severally, have further agreed that in the event of any default on the part of the Consenting Defendants in compliance of the terms and conditions of the compromise, whether fully or partially, the decision of the Applicant shall be final and binding upon the Consenting Defendants and the Applicant shall have a right to immediately cancel the settlement and recover the entire Settlement Amount, together with future interest, costs and other amounts, without any relief and concession and accordingly the Applicant shall be entitled to get the Recovery Certificate issued without any further delay. The Consenting Defendants, jointly and severally, further agree that the Applicant shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Presiding Officer, DRT, made it abundantly clear that the rate of interest was determined in view of the consent given by both the parties. Clause (c) of the operative part of the order reads as under : "(C) The rate of interest is granted by this Tribunal in view of consent given by both the sides that whatever rate of interest is fixed by this Tribunal, that shall be acceptable to both the sides." 32 In this backdrop, the Petitioner would now be precluded from the challenging the grant of interest at the rate of 8% per annum, based on the consent and concession made by the Petitioner as well. The learned counsel for the Petitioner made a feeble attempt to wriggle out of the situation by submitting that no such express concession was made. We are afraid to accede to this submission. 33 A useful reference in this context can be made to the judgment of the Supreme Court in the case of State of Maharashtra vs. Ramdas Shrinivas Nayak & Anr. (1982) 2 Supreme Court Cases 463, wherein it was enunciated that statements of fact as to what transpired at the hearing, recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or usage interest on loans and advances may be charged on periodical rests and also capitalised on remaining unpaid. The principal sum actually advanced coupled with the interest on periodical rests so capitalised is capable of being adjudged as principal sum on the date of the suit. (2) The principal sum so adjudged is 'such principal sum' within the meaning of Section 34 of the Code of Civil Procedure, 1908 on which interest pendente lite and future interest i.e. postdecree interest, at such rate and for such period which the Court may deem fit, may be awarded by the Court. (3) Corpn. Bank vs. D.S. Gowda and Bank of Baroda vs. Jagannath Pigment & Chem., have been correctly decided." 37 As regards the award of interest, pendente lite and postdecree, the Supreme Court expounded the following proposition : "55 ............. (8) Award of interest pendente lite and postdecree is discretionary with the Court as it is essentially governed by Section 34 of the CPC de hors the contract between the parties. In a given case if the Court finds that in the principal sum adjudged on the date of the suit the component of interest is disproportionate with the component of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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