TMI Blog2005 (7) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. Hence, this judgment will apply to all the above mentioned cases and other cases listed before us, relating to the Securitisation Act. 3. We have heard learned counsel for the parties and have noted their contentions. 4. Before dealing with these contentions we may refer to the decision of the Supreme Court in Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513, in which the Supreme Court dealt with the challenge to the validity of various provisions of the Securitisation Act. 5. In Mardia Chemicals Ltd. s case ( supra ), it was submitted before the Supreme Court that the Securitisation Act introduces drastic measures for the seizure and sale of properties of the borrowers or taking over of the management or possession of the secured assets. It was submitted that there was no occasion to enact such a draconian legislation to find a short cut to realize the alleged dues without their ascertainment by an adjudicatory authority. It was submitted there is already a special enactment providing for recovery of dues by banks and financial institutions, being the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. Hence, it was not necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy of NPAs was not called for or that it was superimposition of undesired law since one legislation was already operating in the field namely the Recovery of Debts Due to Banks and Financial Institutions Act. It is also to be noted that the idea has not erupted abruptly to resort to such a legislation. It appears that a thought was given to the problems and the Narasimham Committee was constituted which recommended for such a legislation keeping in view the changing times and economic situation where after yet another Expert Committee was constituted, then alone the impugned law was enacted. Liquidity of finances and flow of money is essential for any healthy and growth-oriented economy..." (p. 538) 8. In view of the above, the Supreme Court upheld the validity of the Securitisation Act, except section 17(2). 9. However, the Supreme Court held that section 17(2) of the Securitisation Act which requires a pre-deposit of 75 per cent of the amount of demand notice before an appeal can be entertained by a Tribunal is unreasonable, arbitrary and violative of Article 14 of the Constitution of India ( vide paragraph 64). While striking down section 17(2) the Supreme Court uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or points raised in reply to the notice served upon them before proceeding to take measures under sub-section (4) of section 13. Such reasons, overruling the objections of the borrower, must also be communicated to the borrower by the secured creditor. It will only be in fulfilment of a requirement of reasonableness and fairness in the dealings of institutional financing which is so important from the point of view of the economy of the country and would serve the purpose in the growth of a healthy economy. It would certainly provide guidance to the secured debtors in general in conducting the affairs in a manner that they may not be found defaulting and being made liable for the unsavoury steps contained under sub-section (4) of section 13. At the same time, more importantly, we must make it clear unequivocally that communication of the reasons not accepting the objections taken by the secured borrower may not be taken to give an occasion to resort to such proceedings which are not permissible under the provisions of the Act. But communication of reasons not to accept the objections of the borrower, would certainly be for the purpose of his knowledge which would be a step forwar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raise all objections, legal and factual, which he is advised, in reply to the notice under section 13(2) of the Securitisation Act, and the objections of the borrower must be considered by the secured creditor and if the same are rejected, the reasons must be communicated to the borrower. 14. In fact, this has now been expressly provided by sub-section (3A) of section 13, which reads as follows : "(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower : Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A." 15. The abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act." 18. The above proviso was inserted by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 with effect from 11-11-2004. 19. Learned counsel submitted that if an application of a bank or financial institution is pending before the Debts Recovery Tribunal then action cannot be taken under the Securitisation Act without first getting permission from the Debts Recovery Tribunal to withdraw the application pending before it. 20. In the case of the petitioner in W.P. No. 13056 of 2005, the Indian Bank had filed an application before the Debts Recovery Tribunal in the year 2002 and the notice under section 13(2) of the Securitisation Act was issued on 15-2-2005. As regards the petitioners in W.P. Nos. 37153 and 37154 of 2004 the application before the Debts Recovery Tribunal was filed in the year 1998 and the notice under section 13(2) of the Securitisation Act was issued on 5-5-2004. Thus, as regards W.P. No. 13056 of 2005 notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 PC 181 (page 186).A construction which attributes redundancy to the Legislature will not be accepted except for compelling reasons, vide Ghanshyamdas v. Regional Asstt. CST AIR 1964 SC 766; State of UP v. Radhey Shyam, AIR 1989 SC 682, etc. 27. The notice under section 13(2) of the Securitisation Act is a statutory notice. Hence, in our opinion, issuance of such a notice is an action taken under the Securitisation Act. 28. There is a difference between a statutory notice and a non-statutory notice. In the case of a non-statutory notice it could not be said that it was an action taken under the Securitisation Act, but in the case of a statutory notice under section 13(2) it is certainly a step for recovery under the Securitisation Act, and is hence action taken under the Act. Hence, in our opinion, if notice under section 13(2) had been issued prior to 11-11-2004, there is no requirement to take permission from the Debts Recovery Tribunal for withdrawal of an application pending before it. It is only where notice under section 13(2) is sought to be issued subsequent to 11-11-2004 that permission for withdrawal of an application pending before the Debts Recovery Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r filing an application under section 17. Such fee can be the fee as prescribed under the rules. 34. Rule 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Removal of Difficulties) Order, 2004, states : " Fee for filing of an appeal to Debts Recovery Tribunal. The fee for filing of an appeal to the Debts Recovery Tribunal under sub-section (1) of section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 shall be mutatis mutandis as provided for filing of an application to the Debts Recovery Tribunal under rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993." 35. Learned counsel for some of the petitioners submitted that the borrower cannot file an application before the Debts Recovery Tribunal and only the bank can file it. Hence they submitted that the fees prescribed under Rule 3, as quoted above is unworkable and/or arbitrary. We do not agree. It may be noted that Rule 3 uses the words mutatis mutandis which means with the necessary changes . Hence, there is no force in the submission of the learned counsel for the petitioner. 36. Moreov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... point had been entertained by this Court we permit the filing of the application under section 17 with the requisite prescribed fee within one month from today, and if that is done, the application will be entertained by the Tribunal without raising any objection as to limitation and shall be decided on merits expeditiously thereafter. 41. Some of the learned counsels have stated that applications under section 17 of the Securitisation Act were filed, but without paying the prescribed Court fees. The said Court fees can be paid within one month from today, and if that is done the appeal will be treated as maintainable. Some learned counsels stated that the application under section 17 of the Securitisation Act was returned for not paying the prescribed Court fees or for some other reason. They can be represented within one month, and if that is done, the same will be treated as within limitation. 42. Some of the learned counsels submitted that the Court should direct one time settlement or fixing of instalments or rescheduling the loan. In Tamil Nadu Industrial Investment Corpn. v. Millenium Business Solutions (P.) Ltd. 2004 (5) CTC 689, it has been held that this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores of bank loans are outstanding in India and have not been repaid. In many cases, there have been interim orders of various Courts which have stayed the recoveries. Many of such interim orders were wholly unjustified, and passed only by adopting an over liberal approach. Unless repayment of the loan is done the bank or financial institution cannot grant a fresh loan, and hence new industries cannot be set up. Thus, by staying such recoveries incalculable harm has been done, and will continue to be done, to the economy, because persons who are genuinely in need of loans for setting up new industries cannot get such loans because the borrowers have not repaid them. This Court should certainly not countenance such grave malpractices. 47. We may thus summarise our conclusions as follows : (1) Challenge to the constitutional validity of the provisions of the Securitisation Act is rejected in view of the decision of the Supreme Court in Mardia Chemicals Limited v. Union of India [2004] 51 SCL 513 . (2) Where the challenge is to the notice under section 13(2) of the Securitisation Act, this challenge is rejected on the ground of alternative remedy of filing a reply to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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