TMI Blog2003 (7) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... so an admitted position that as per the information supplied to the Court that none of the petitioners has approached Debt Recovery Tribunal (hereinafter referred to as "DRT") against the action of the Bank under section 13(4) of the Act by preferring appeal under section 17 of the Act and all these petitions are preferred under article 226 of the Constitution of India before this Court. 2. I have heard the learned counsel appearing for the parties namely, Mr. Mihir H. Joshi, Mr. N.K. Majmudar, Mr. Bhagat, Mr. M.S. Shah, Mr. S.S. Shah, Mr. P.S. Champaneri, Mr. Marshal, Mr. J.T. Trivedi, Mr. A.M. Parekh, Mr. C.L. Soni, Mr. Kapadia, Mr. A.M. Raval, and Mr. Jayesh Dave, and other learned Advocates appearing on behalf of the petitioners who are mainly representing borrowers or loanees or the guarantors. I have also heard learned counsel, Mr. M.J. Thakore, with Mr. Sangi, Mr. S.N. Soparkar, with Mr. Amar Bhatt, Mr. K.S. Nanavati with Mr. Chudgar, Mr. Panesar, Mr. P.V. Nanavati, and Mr. G.S. Thakkar, and other learned Advocates appearing for Financial Institution, Nationalized Banks, Other Banks and the Co-operative Banks, as the case may be. 3. The other learned counsel appearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted by the concerned petitioners to the Bank, but Bank has not taken any action under section 13(4) of the Act; ( e )the petitions wherein Bank has taken action under section 13(4) of the Act and the matter is before the action of sale is taken or at a stage where proceedings for sale of the secured assets are going on; ( f )the petitions wherein Bank was resorted to the remedy under section 13(2) of the Act, but the earlier proceedings initiated by the Bank are either pending before the DRT or before the Registrars Board of Nominees or before the Gujarat State Co-op. Tribunal or Appellate Forum or Higher Forum under any other law for the time being in force for the recovery of the money by the financial institutions or the bank against the borrowers; ( g )the petitions wherein there is a binding decision of either of DRT or of its Appellate Forum or of Registrars Board of Nominee or of the Tribunal, as the case may be, on facts of adjudicating the outstanding amount and either the recovery certificate is issued or the award is passed which is in the process of execution; ( h )the petitions wherein the contentions raised are that the condition precedent of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset; ( 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. 6. Sub-section (3) of section 13 mandates to communicate to the borrower the details of the amount payable by him and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. 7. Section 17 of the Ordinance confers upon the borrower, aggrieved by any of the measures referred to in sub-section (4) of section 13 by the secured creditor or his authorised officer, right of appeal to the Debts Recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dinance by Act, the challenge to the constitutionality of the Act cannot be entertained since the constitutionality of the pari materia provisions of the very Ordinance which is substituted by the Act is already upheld by the Division Bench of this Court. In any case, the view taken by the Division Bench upholding the constitutional validity of the Act is binding to this Court. 10. Mr. Kapadia appearing for the petitioners could not show any of the distinguishing provisions of the Act vis-a-vis the provisions of the Ordinance. However, he only submitted that in view of the observations made by the Division Bench in the aforesaid judgment at para 11 that the exercise of examining the validity or even otherwise was academic and, therefore, it cannot be concluded that the Division Bench in the case of M.R. Utensils ( supra ) upheld the constitutional validity of section 13 of the Act which is challenged by him. In my view, the observations made from para 4 to 10 which have been reproduced earlier shows that the Division Bench did examine the challenge to the pari materia provisions of the Ordinance and, therefore, the binding effect of the view of the Division Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ics and such cannot be said to be bona fide action on the part of any litigant in the Court of law. Therefore, since such challenge to the vires of certain provisions of the Act by the petitioners, who are represented by Mr. A.M. Raval, Mr. Kapadia and Mr. Baxi lacks bona fide . Such amendment in the petition by bringing challenge to the vires of the provisions of the Act which is otherwise also concluded by the decision of the Division Bench of this Court and, therefore, also should not be allowed and deserves to be rejected. 12. The aforesaid takes me to examine the contentions raised by the learned counsel appearing for the parties on the premise that the Act is intra vires to the powers under the Constitution of India. Before I consider the challenge and the contentions raised, some background beyond the Ordinance and the Act is required to be taken note of and such would enable the Court to interpret and examine various challenges made keeping in view the intention of the Parliament for legislating the Act. In the case of K.P. Varghese v. ITO AIR 1981 SC 1922, the Apex Court, while considering the principles for interpretation of the Statutes, has observed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mortgages. But this situation became totally out of context with subsequent developments. Our Economic conditions have vastly changed since the enactment of the Transfer of Property Act, 1882. The role of unscrupulous moneylenders dominating in the field of credit is no longer valid. It is not the village money lenders who is primarily required to extend credit in the mofussil. With our reliance on the industrialization of credit, banks and our financing institutions are the major lenders of credit today. In their dealings with their mortgagors, it is anachronistic to assume that they will adopt the unscrupulous methods which are characteristic of unscrupulous moneylenders. In fact in extending credit, the necessity for suitable safeguards to banks and other financial institutions is now rightly stressed. It is understandable that the legal framework essentially conceived to deal with credit given by banks and other financial institutions, whose motivation is essentially not profit but socio-economic development." On the question of vesting of the power of sale in DFI s/Banks the Committee observed that the power of sale in certain institutions like Land Development Banks and St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, that the notification dated 28-1-2003 issued by Ministry of Finance, Government of India in exercise of power under Item V of clause C of sub-section (1) of section 2 of the Act of specifying Cooperative Bank as the Bank under the Act is ultra vires the powers of the Constitution inasmuch as, so far as the Cooperative Banks are concerned it would fall under Entry 32 of the State List and the same would not fall either under Entry 43 or under Entry 45 of the Central List. 16. On the other hand, the learned counsel appearing for the Cooperative Banks submitted, inter alia , that the Cooperative Banks are even otherwise covered under the Banking Regulations Act and, therefore, Cooperative Banks, even in absence of such notification, can invoke the provisions of the Act since they are covered as the Banks under the provisions of Banking Regulations Act. It was also submitted on behalf of the Cooperative Banks that the matter pertaining to transaction of banking includes the recovery of loans and, therefore, when the procedure is provided for recovery of loans or recovery of the bank dues, it is not a matter under Entry 32, but it is a matter under Entry 45. The scrutiny of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my view, goes to show that in substance the provisions of Part-II of the BRA relating to business of the Banking Companies are made applicable with modifications to all Cooperative Banks. It can hardly be legitimately disputed that method provided for recovery of loan by realisation of secured assets and thereby to provide mode for reduction of non-performing assets by the Cooperative Bank would not be a matter pertaining to Banking business, merely because a bank is a Cooperative Bank. The law pertaining to regulating banking business would, by natural construction, include the method and manner of recovery of loans and realisation of assets and also the non-performing assets and hence it would not be sufficient to construe that Parliament has no power to legislate upon the method and manner of Regularisation and Enforcement of Security Interest which also includes recovery by the Cooperative Banks and it would fall under Entry 32 of State List. As such if a matter pertains to incorporation, regulations and winding up of Cooperative Societies, it would fall under Entry 32 of the State List, but the law providing the remedy of realisation of secured assets by the Cooperative Bank c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the said judgment is of no help to the petitioners. In exercise of the power under section 2(1)( c )( v ) of the Act, the Central Government has included by the impugned notification, the Cooperative Banks in the definition of Bank and the same, in my view, is within the scope and ambit of the legislative competence of Parliament and cannot be said to be ultra vires the powers under the Constitution of India. The notification is subordinate legislation and the purpose of the enactment of the main Act itself is for providing procedure for regulation and realisation of security interest in secured assets by the banks and when the Central Government in its legislative wisdom has found it proper to include Cooperative Banks also within the definition of the word "Bank" for attaining the object in the field of Cooperative Banks, it cannot be said that such piece is of subordinate legislation as per the impugned notification is beyond the scope and ambit of the Act itself and, therefore, challenge to the legality and validity of the notification dated 28-1-2003 on the ground that it is ultra vires of Parliament or Central Government, fails and hence rejected. 19. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the petitioners have contended, inter alia , that the operation of the Act is prospective in nature and is not retrospective. In furtherance to the said submission, it has been contended that unless the apparent intention of the Legislature is to make any statute retrospective, a normal presumption would be to treat it as prospective. It was submitted that the language used under section 13(2) "makes any defaults" and the language "such debt is classified" are sufficient to show the intention of the Parliament to make the provisions of the Act as prospective. It was also submitted on behalf of the petitioners that certain provisions of the Act, more particularly chapter IV is not even brought into force requiring for maintenance of registration of securities etc., and, therefore, it was submitted that such circumstances also throw light upon the intention of the Parliament to make the Act prospective and not retrospective and, therefore, it was submitted that it is only in case where the default is after the Act coming into force and the debt which has accrued after the Act has come into force and the loan transaction which has taken place after the Act came into forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other provisions of sub-section (3) and sub-section (4) of section 69 of the TP Act are regulating the manner and method of sale of the mortgaged property. Section 69A the TP Act provides for appointment of the receiver for receiving income of the mortgaged property or any part thereof. Therefore, it appears that the provisions of sections 67, 68, 69 and 69A are the provisions made under the TP Act providing for the procedures to be followed by the mort- gagee for realisation of money from a mortgagor and upon failure by the mortgagor to make the payment after such notice the entitlement of the decree in respect to mortgaged property and the consequential sale etc. If the provisions of the present Act are examined, Chapter III itself provides for enforcement of the security interest. Section 13(1) of the Act provides for the rights of any secured creditor to enforce security without intervention of the Court or Tribunal notwithstanding anything contained in section 69 or 69A of TP Act. The perusal of various provisions made under Chapter III namely, section 13 providing for enforcement of security interest, section 14 providing for Chief Metropolitan Magistrate or District Mag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or may commit any person for management as the receiver or may confer upon the receiver of such powers as it may deem fit as per the provisions of Order 40 Rule 1. Therefore, the measures are provided even under the CPC which itself is a procedural law for regulating the procedure of all the civil suits including suits by mortgagee against mortgagor for recovery of mortgage money, interest, etc. The only distinguishing features are that the procedures are provided through the Court, whereas by the present Act, the procedures can be directly effected by the secured creditors for realisation of enforcement of security interest in the secured assets and the action or the measures taken by the secured creditors is made subject to the right of the aggrieved party to prefer appeal before the DRT and the second appeal before the Appellate Tribunal. Therefore, such type of the law providing such procedure is not unknown or something new. The law would continue to remain as procedural law, whether the remedy is provided of enforcement of security interest in secured assets, either through the Court or directly by secured creditor and the intervention of the Tribunal or Appellate Tribunal th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 69. Now by the present Act an additional procedure is provided for secured creditor for enforcement by realisation of security interest. No defaulter who has become liable to make the payment as per terms of agreement of loan can assert as of right, that since the procedure or recovery of the defaulted money is provided additionally or changed by the Legislature or the Parliament, it results into altering a vested right of mortgagor who has acquired status of a defaulter by not paying the mortgage money or loan amount as agreed. As such no defaulter can invoke principles of equity by contending that recovery through intervention of court was to result into delay in process of recovery and since the same will not be there on account of direct power/right given to creditor, injustice will be caused to him if provisions of the Act are interpreted as retrospective or retroactive. No person can be allowed to contend that since the procedure is changed of facing the consequences of default, may be through the intervention of the Court initially or afterwards such procedural laws should be read as prospective only and it would not apply to the defaults which has already become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nant is entitled to protection under clause 13A or not observed at para 8 as under :- ". . .The provisions came into force when the appeal was pending. Therefore, though the provision is prospective in force has retrospective effect . This provision merely provides for a limitation to be imposed for the future which is no way affects anything done by a party in the past and statutes providing for new remedies for enforcement of an existing right will apply to future as well as past causes of action. The reason being that the said statutes do, not the affect existing rights and in the present case, the insistence is upon obtaining of permission of the Controller to enforce a decree for eviction and it is, therefore, not retrospective in effect at all since it has only retroactive force." (p. 1979) The Apex Court further observed at para 9 as under : "9. The problem concerning retrospectivity concerning enactments depends on events occurring over a period. If the enactment comes into force during a period it only operates on those events occurring then. We must bear in mind that the presumption against retrospective legislation does not necessarily to apply an enactment merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has not kept pace with the changing commercial practice and with the Financial Sector Reforms, the Act has been enacted. It also shows that the mode of recovery through DRT was very low in comparison to the claims involved of the nationalized Banks and hence the Act has been enacted. Even otherwise also if the provisions of the Act itself are examined, section 2( f ) defines that the word "borrower" means any persons who has been granted financial assistance by any Bank or who has given any guarantee. The language used in the definition clause of borrower under section 2( f ) shows the intention of the statute to include all borrowers who have been granted financial assistance before the Act came into force. Section 2( j ) defines the word "default" and the language used is "account of such borrower is classified as non-performing assets." Section 2( k ) provides for definition of financial assets also uses the language "any loan or any advance granted or debenture, bond subscribed or guarantee given", section 2( n ) provides for definition of hypothecation, where the language used is "credit by a borrower", section 2( z )( c ) providing for defining secured assets provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered that in view of the provisions of the present Act the transactions of loan already entered into prior to the Act would also be covered in the present Act. The learned Counsel for the petitioners had pressed in service the doctrine of election for substantiating such contention. It was also submitted on behalf of the petitioners that in view of section 13(10) providing for filing of the application before the DRT for the balance amount of the dues of the secured creditors shows that the Parliament intended for only one remedy at a time and after the one remedy is exhausted, the second remedy can be resorted to. 32. On behalf of the respondent banks, it was submitted, inter alia , that as such the principles of doctrine of election would not be applicable in the present case since there are not inconsistent remedies and the remedy provided under the present Act is a remedy limited to the enforcement of the security interest qua secured property, whereas remedy in normal law for recovery of outstanding is would be wider remedy, which can be enforced against the personal property of the judgment debtor in case if such contingencies arise. It was also submitted on behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebts Due to Banks and Financial Institutions Act, 1993 or any other law for the time being in force. Hence when two modes of recovery of the realisation of the dues are provided out of which one is limited to secured assets or security interest in secured assets and the another is against all assets including personal assets of the Debtor, it cannot be said that such remedies are inconsistent to each another. The remedy provided under the present Act is restricted remedy to secured creditors that too a certain class of secured creditors, whereas the law for providing normal remedy for all class of creditors is a wider remedy. There is nothing as such inconsistent in both such remedies, save and except, when the question arises for resorting to both the remedies simultaneously qua the secured assets, which shall be dealt with hereinafter. As such the question of considering the doctrine of election would arise only when there are two inconsistent remedies provided. 34. In the case of Nagubai Ammal v. B. Shama Rao AIR 1956 SC 593, while considering the contention for doctrine of election, the Apex Court observed at para 23, the relevant portion is as under : "It is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itute a suit or the right available to it under section 31 of the Act. Since, the Corporation can withdraw from the Court its proceedings under section 31 of the Act at any stage, it would imply that it has the right to withdraw from further proceedings under sections 31 and 32 of the Act even after obtaining an order in its favour and take recourse to the proceedings under section 29 of the Act without pursuing the proceedings under section 31 of the Act any further. The Corporation cannot, indeed, execute the order under section 31 of the Act and yet simultaneously take recourse to proceedings under section 29 of the Act for the same relief. The position may also be different if the claim of the Corporation is negatived, on facts, by the Court in the proceedings under section 31 of the Act. In that event depending upon the facts of each case, it may be permissible to hold that fair play and justice demand that the Corporation is not allowed to take recourse to the provisions of section 29 of the Act. . . ." (p. 663) 36. Thus, from the above observations of Apex Court it appears that the answer to the question posed in the opening part of the judgment is found in affirmative b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... something done by the opponent under the decree and there is no justification for extending the rule in Tinkler s case [1894] 154 ER 1176 to cases like the present. . . ." (p. 1330) The Apex Court further observed as under : ". . . Further, it seems to us that the existence of a choice between two rights is also one of the conditions necessary for the applicability of the doctrine of approbate and reprobate. In the case before us there was no such choice before the appellant, and, therefore, his act in withdrawing the pre-emption price cannot preclude him from continuing his appeal. . . ." (p. 1330) 38. In view of the above, it appears that the doctrine of election and the rule that a person cannot approbate and reprobate at the same time is based on the principles of equity. It is well-settled that no principles of equity can march over any statutory provisions or requirement of law. However, at the same time, when two remedies are simultaneously provided under the Act, even if the Court interprets to the extent that both the remedies can simultaneously be resorted to, no situation can be allowed to be created against basic principles of fair play and justice. The Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is with that purpose the provisions of section 37 are made in the Act. But if one remedy at a time is permitted on the condition is read that for resorting to the present remedy under the Act, the other proceedings before the Tribunal or before any com- petent forum for recovery of the outstanding dues should be withdrawn, then in that case, for all time to come, it may result into abandonment of the claim by the creditor which can never be said to have been intended by the Parliament while enacting the present Act and, therefore, also the contention raised on behalf of the petitioners deserves to be rejected and hence rejected. 40. However, in a given case it may happen that the bank or the financial institutions may resort to simultaneous remedies as provided under the Act, but in such circumstances no party to the proceedings, either under the Act or before the competent forum under any other law for time being in force for recovery of the outstanding dues, can be allowed to create a situation of nullifying the effect of a binding judgment on facts by resorting to the provisions of the present Act, nor can any party be allowed to create a situation which may results into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 13 of the Act. 42. If the aforesaid provision is examined keeping in view the provisions of section 13(9) of the Act, it is apparent that where there are more than one secured creditors no secured creditor is entitled to exercise any or all of the rights under section 13(4) unless exercise of such right as agreed upon by the secured creditors representing not less than 3/4 in value of the amount outstanding as on a record date and such action shall be binding on all the secured creditors. Therefore, even if the notice is issued under section 13(2) of the Act, it is obligatory on the part of the secured creditor who is desirous to take measure under section 13(4) of the Act to get consent of the secured creditors representing not less than three-fourth in value of the amount outstanding. Therefore, when the Legislature in its wisdom has found it proper to ensue the consequences of abatement of the reference even if in respect of a single financial asset, the measures are taken under section 13(4) of the Act by one of the secured creditors that the consent of the three-fourth of the secured creditors representing the value of the amount outstanding, then in that case it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, therefore, such remedy cannot be said to be meaningful and, therefore, with a view to make the remedy meaningful also the principles of natural justice should be read. It was submitted on behalf of the petitioners that the principles of natural justice should also be read to the extent of giving opportunity of hearing because the Bank has to determine the amount due and has also to take the action on the basis of the alleged default. 45. On the other hand, on behalf of the respondent banks, the learned counsel had submitted that the decision of the Banks for enforcement of the security interest as provided under section 13(1) and (2), is essentially administrative decision of the Banks and, therefore, there is no question of observing the principles of natural justice. It was also submitted that in any case the remedy is provided after the action is taken as per section 17 and, therefore, there is no question of application of principles of natural justice since post action opportunity is given under section 17. It was also submitted that the intention of the Legislature is apparent because if the Bank wants to take possession of any secured assets as per section14 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have been done under the corresponding provisions of this Act and, therefore, it can reasonably be construed that the aforesaid Rules shall continue to operate unless new Rules are framed. Rule 3 provides for mode of serving demand notice including that if there are more than one borrower, the demand notice shall be served on each borrower. Rule 4 provides for procedure to be followed after the issuance of the notice which, inter alia , provides for the mode and manner of taking possession of the property under section 13(4) of the Act. Rule 5 provides for obtaining value of movable secured assets and to fix the reserved price. Rule 6 provides for the mode and manner of sale of movable secured assets. Rule 7 provides for issuance of sale certificate in respect to movable secured assets. Rule 8 provides for sale of immovable secured assets including the manner and procedure to be followed for sale of immovable property. Rule 9 provides for time of sale, issue of sale certificate and delivery of possession etc., of the immovable property and various steps to be taken for such purpose. Rule 10 provides for appointment of the Manager in consultation with the borrower to manage the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent Act, one of the additional modes of recovery of mortgage money is provided and, therefore, resorting to the remedy provided by the present Act for enforcement of the security interest would essentially be a decision of the Bank as secured creditor. At the most it can be termed as a business decision or administrative decision while rendering banking business by any financial institutions. 48. In the case of Alka Ceramics v. Gujarat State Financial Corpn. 1990(1) GLR 628, the Division Bench of this Court, while examining the constitutional validity of sections 29 and 31 of the State Financial Corporations Act, 1951 had an occasion to consider the question as to whether the Financial Corporation, while resorting to the remedy under section 29 of the State Financial Corporations Act for recovery of its dues which is a remedy provided in addition to and not in derogation to any other law for the time being in force, is acting as exercising quasi-judicial function or not. The Division Bench of this Court, at para 12, observed, inter alia , and the relevant portion reads as under : "It would, thus, be clear that when Corporation decides to resort to section 29 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s policy requirement, the Corporation may proceed further under section 29 in accordance with law, but in that case, it would be acting fairly, reasonably and in accordance with the principles of natural justice and not arbitrarily." 49. In the case of Haryana Financial Corpn. v. Jagdamba Oil Mills [2002] 3 SCC 496, the Apex Court at para 15, while considering its earlier view in "Mahesh Chandra case", observed that if the guidelines as indicated in "Mahesh Chandra" are to be strictly followed, it would be giving premium to dishonest borrower. It further observed as under : ". . . It would not further the interest of any Corporation and consequently of the industrial undertakings intending to avail financial assistance. It would only provide an unwarranted opportunity to the defaulter (in most cases chronic and deliberate) to stall recovery proceedings. It is not to be understood that in every case the Corporations shall take recourse to action under section 29. Procedure to be followed, needless to say, has to be observed. If any reason is indicated or cause shown for the default, the same has to be considered in its proper perspective and a conscious decision has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehalf of the petitioners that the bank is made as the judge of its own cause is meritless and deserves to be dismissed. As such the bank is given right as remedial measure for enforcement of the security interest and the remedy is provided under section 17 of the Act of challenging the action of the Bank before the DRT and a further appeal to Appellate Tribunal as per section 18. Such remedy of appeal and further appeal are to the extent that if the Tribunal or the Appellate Tribunal holds that the possession of the secured assets is wrongfully taken, the possession may be returned and payment of compensation and costs can also be ordered. Therefore, merely because remedy is provided after the measures are taken by the bank under section 13(4) of the Act, it cannot be construed that right given to the bank must be read with all requirements of following principles of natural justice. 52. Therefore, the aforesaid calls for examination also of the question on the part of the bank to resort to remedy of enforcement of the security interest is secured assets as per the provisions of the Act. It is well-settled that in any civilized society, nobody should allowed to create a situati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) and (4) is that the secured creditors "may". It will be for the secured creditor to apply its banking business wisdom keeping in view any other prohibitory or mandatory guidelines, if any, issued by RBI and then to exercise the rights under section 13(4) of the Act. In a given case, the borrower may pay up a substantial or sizeable amount of about 75 per cent for discharging his liabilities and may seek time or in a given case the borrower may pay up the full amount of the valuation of the property or in a given case borrower may make a good and more viable offer by strengthening security interest of the secured creditor, may be by offering other security assets or otherwise. There cannot be any exhaustive list for various contingencies, but suffice it to say that it would be for the bank or secured creditor to consider the response or reply of the borrower within the aforesaid period of 60 days and thereafter if the bank finds that the offer made by the borrower cannot be accepted then the bank may communicate the borrower accordingly, but that does not mean that the bank is required to pass a reasoned order by dealing with each and every contentions or offer made by the borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce are dismissed on technical aspects, but not on facts or without examining the legality and validity of the transactions of mortgage or security interest created or without examination of the facts for actual amount of outstanding, the secured creditor cannot take recourse to the present Act, but it would vary from facts to facts of each case. 53. The attempt was made by the learned Counsel appearing for the Cooperative Banks to submit that even if the appeal is pending before the Appellate Forum and interim injunction is granted by the Appellate Forum against the execution of a decree or award of fulfilment of certain conditions and even if such conditions are complied with and the stay against the execution of decree or award operates, the bank or the secured creditor can resort to remedies under the present Act in view of section 34 read with section 35 of the Act. As such, on a plain and simple reading of section 34 and section 35 would not amount to nullify the effect of any binding judgment or order of the competent forum operating against the bank in taking steps for recovery of outstanding dues, but it will be for the secured creditors to move appropriate forum, Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rars Board of Nominee. Even for Coop Banks registered under Multi-State Co-operative Societies Act, 1984, the power of the adjudicating dispute are assigned to State Registrars Board of Nominee and, therefore, their position is also more or less at par with other Cooperative Banks. It has become necessary to examine the aforesaid aspect, because in the present group of petitions, some of the respondent Banks are Co-op Banks registered as Co-op Societies under the Act, 1961 or under multi-State Co-operative Societies Act, 1984. It is not necessary to examine at this stage on the question as to whether the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 can be made applicable to Co-op Banks Registered under the Act, 1961 or under Multi-State Co- operative Societies Act. It may be that such Co-op Banks in a given case, even if they are assumed as covered under the Act, 1993 may not resort to proceedings before the DRT for various reasons, may be on account of quantum of court-fees to be paid, forum of appeal, the method and manner applied for summary suit being preferred by Co-op Banks under the Act, 1961 and various other reasons which may be rather known to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be unfair on the part of the secured creditor to resort to the remedy under section 13 of the Act, unless and until such prohibitory order is clarified, vacated or set aside by higher forum known to law. If there is no express prohibitory order of any competent forum under any other law for the time being in force the secured creditor may be justified in proceeding for resorting to the remedies provided under section 13 of the present Act. Similarly, if simultaneous remedies are resorted to under any other law for the time being in force as well as under the present Act before the same forum or before different forums, then in that case qua secured assets is con- cerned, if the recovery is already affected and money is realised in either of the proceedings the fair place action does require that such realisation of money shall be duly given credit of in another proceedings. In a situation, where proceedings are pending before the competent forum under any other law for the time being in force and the bank also resorts to remedy provided under section 13 of the present Act, then the fair play action and the basic principles of rule of law and justice does require that qua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng possession as per section 14(2), as may be required can be applied. 56. Therefore, the above minimum observance of fair play action and some element of natural justice would be required to be followed on the part of the secured creditor resorting to the remedies provided under section 13 of the Act for enforcement of the security interest qua secured assets prior to measures under section 13(4) of the Act and not full-fledged observance of principles of natural justice as sought to be canvassed on behalf of the petitioners as that of giving opportunity of hearing to the borrower by the Bank in every case and as that of passing a speaking order by dealing with each and every aspect of the case or contentions raised by the borrower in reply to the notice. Reliance was placed by the learned counsel appearing for the petitioners upon the decision of the Apex Court in the case of S.K. Bargava v. Collector [1998] 5 SCC 170 for contending that principles of natural justice with its full span should be read before the Bank takes action under section 13(4) of the Act. In the case of S.K. Bargava ( supra ) the Apex Court, in view of the language of section 3 providing for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt or authority in respect of any action taken or to be taken in pursuance of power conferred by or under this Act or under the Act of 1993. 59. On behalf of the respondent Banks, more particularly those banks which are not nationalized banks, it was also contended that they are not the instrumentality of the State within the meaning of article 12 of the Constitution of India and, therefore, the petition under article 226 of the Constitution of India against such banks which are not nationalized banks cannot be maintained. 60. It is true that the jurisdiction of Civil Court is expressly ousted by section 34 of the Act and it is also construed that the legislature has given mandate to any Court or authority not to give injunction in respect of any action to be taken or to be taken in pursuance of the power conferred by or under this Act or under the Act of 1993, but as per the settled legal position, if there is inherent lack of right or power with the bank or secured creditor the action for resorting to the remedy under the alleged right or power under those circumstances can be said to be ultra vires the provisions of the Act. As observed earlier, even if the rights of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied." 61. This Court in the case of Arvindbhai Mulubhai Bhutaiya v. Amreli District Central Co-op. Bank Ltd. 1998(2) GLR 1740, in respect to Cooperative Bank, had an occasion to consider that even though a Cooperative Bank is not an instrumentality of the State within the meaning of Article 12 of the Constitution of India, the Cooperative Bank is discharging public duty or obligation and not the private duty, when the obligation is created by the statute as an employer. Ultimately, view taken by this Court is that when an obligation is created under a standing order in a Cooperative Bank as an employer and if it is breached or is not followed, it results into breach of public duty and, therefore, the writ can be issued. 62. The words "public duty" normally can be interpreted in contra distinction to the words "private duty". The "private duty" is such which is created by contract or agreement or customary right or otherwise, whereas "public duty" would be a duty cast upon any person by a statute. If the statute is to govern the rights of the private parties, inter se , only it may not result into "public duty", but if it is to result into giving certain rights and ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any securitisation company or reconstruction company fails to comply with the directions of the RBI, it shall be punishable with the fine, which may extend to Rs. 5,00,000 (Rupees five lacs only) and in the case of a continuing offence, with an additional fine which may extend to Rs. 10,000 for every day during which the default continues. Section 29 of the Act provides that if any person contravenes or attempts to contravene or abets the contravention of the provisions of this Act or of any rules made thereunder, he shall be punishable with imprisonment for a term which may extend to one year, or with fine, or with both. Section 30 of the Act provides for trial of the offence punishable under this Act by Metropolitan Magistrate or a Judicial Magistrate of the First Class. The pertinent aspect of the case is that the section 32 of the Act provides for protection of any action taken by any secured creditor or any officer or manager for anything done or omitted to be done in good faith under this Act. Such provisions would normally not be there in a statute, where there is creation of, inter se , only private duty. Similarly, section 34 of the Act also provides for a restriction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the parties and, therefore, it cannot be said that those secured creditors who are not nationalized banks are not amenable to the jurisdiction of this Court under Article 226 of the Constitution of India. On a conjoint reading of various provisions of sections 13, 14, 15 and 16 and others of the Act read with the aforesaid Security Interest Enforcement Rules, 2002, it appears that the right conferred to a certain class of secured creditors by the present Act is having its statutory character and various provisions are made for the manner and method of exercising the right as remedial measures for recovering mortgage money are not only having statutory character, but the intention of the legislature appears to be that when such rights exercised by such secured creditor it shall be in the manner as provided under section 13 read with section 14 read with sections 15 and 16 of the statutory Rules made thereunder, so that not only the rights are conferred upon such secured creditor for enforcement of the security, but such rights are to be exercised for enforcement of the security interest as provided under the Act read with relevant Rules of 2002. Therefore, when any person, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in favour of defaulting parties, which may assist for interference by this Court in observing equitable extraordinary power under Article 226 of the Constitution of India. The aim of equity is to permit honest borrower and not to frustrate the legitimate right of the Corporation which takes steps to recover its dues from defaulting party." 65. Therefore, in view of the aforesaid observations and discussions, the conclusion is as under : 65.1 The present Act is enacted by the Parliament to enable the Banks and Financial Institutions for recovery of its loans and for reducing the level of non-performing assets. 65.2 The impugned notification of the Central Government including the Coop Banks is intra vires the powers of the Central Government as delegated legislative power of the Parliament and such piece of subordinate legislation is legal and valid. 65.3 The provisions of the Act providing remedial measures for enforcement of security interest by secured creditors are having the character of procedural laws and it intends to cover up all transactions already entered into subject to the provisions of within the period of limitation and the defaults in making re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions for amendment in the main Special Civil Application cannot be entertained and rejected accordingly and the applications for such amendment made by the concerned petitioners shall stand dismissed. 66.2 The challenge made by the concerned petitioners to the legality and validity of the notification dated 28-1-2003 issued by the Central Government for specifying "Cooperative Bank" as "Bank" for the purpose of the Act also fails and the petitions shall stand dismissed to that extent. 66.3 The petitioners, who have challenged the action of the Banks of issuing notice under section 13(2) of the Act, but no reply to the notice is given by the concerned borrowers, the Bank as such would be justified in taking measures under section 13(4) of the Act, however, since the matters were pending before this Court, in the interest of justice, such petitioners may submit reply within a period of 15 days from today to the concerned bank/financial institution/the secured creditor, in light of the observations made by this Court in earlier paragraphs of this Judgment/Order and if such reply is submitted, the bank/financial institution shall consider the same, keeping in view the observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clarified that it would be open to the secured creditor to move appropriate competent Forum for such clarification or for vacating of such prohibitory order and if such application is made by the secured creditor, the competent Forum shall render the decision in accordance with law as early as possible, preferably within a period of 60 days from the date of making such applications by the secured creditor. 66.8 The petitioners who have challenged the action of the Bank under section 13(2) of the Act on the ground that the conditions precedent of default or classifying the debt as non-performing assets are not satisfied, will be entitled to submit reply to the Bank within 15 days from today pointing out such aspects and the Bank shall examine and confirm as to whether the conditions precedent are satisfied or not and, if yes, then it would be open to the Bank for taking measures under section 13(4) of the Act. However, it is clarified that if the Bank finds that the conditions precedent are not satisfied, it would not be open to the Bank to proceed for taking measures under section 13(4) of the Act, without prejudice to the rights of the bank to recover money as per any other l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ERS After the pronouncement of the judgment, learned Counsel appearing for the petitioners requested that the ad interim relief which was granted earlier may continue for a period of four weeks so as to enable the petitioners to examine and decide as to whether the petitioners should resort to any further steps for challenging the judgment or for submitting the reply to the Bank. Some of the learned Counsel appearing for the petitioners also submitted that the stay was granted pending the petition in only certain matters and, therefore, the uniformity may be maintained. The learned counsel appearing for the Bank have objected to such request and they submitted that in large number of the matters though stay was not granted, the Bank, on its own, have not taken any further action. Considering the facts and circumstances of the case, since 15 days time is already granted from today to the petitioners to submit reply to the Bank, the Bank would not take any action prior that to. So far as the petitioners who have already submitted reply to the Bank, the Bank would take a reasonable time for considering the reply. Still, however, the petitioners who have already filed reply ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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