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TMI Blog2006 (11) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... wal of O.A. in terms of the first proviso to section 19(1) of the DRT Act, 1993 (inserted by the Amending Act No. 30 of 2004) is a condition precedent to taking recourse to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('NPA Act'). Facts in Civil Appeal No. 3228 of 2006 2. Since the above question arises in a batch of matters, for the sake of convenience, we refer briefly to the facts in Civil Appeal No. 3228/06, in which M/s. Transco is the appellant. 3. In March 1999, O.A. No. 354/99 was filed by Indian Overseas Bank ('the bank') before the DRT, Chennai for recovery of dues from M/s. Transcore appellant herein. The claim was disputed. An interlocutory application was filed by the bank in the said O.A. to bring the properties to sell. That I.A. is pending even today. 4. On 6-1-2003, a notice under section 13(2) of the NPA Act was issued. On 11-11-2004 the following provisos were introduced in section 19(1) of the DRT Act vide amending Act 30 of 2004 : "Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not constitute an action in terms of the first proviso to the said section 19(1) of the DRT Act. Briefly, the first proviso states that, the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the O.A. made before or after the amending Act 30 of 2004 for the purpose of taking action under the NPA Act, 2002, if no such action had been taken earlier under that Act. The contention of the borrower is that the Notice given by the bank on 6-1-2003 was merely a show-cause notice and such notice did not constitute 'action' in terms of the said proviso. Consequently, according to the appellant, the said bank was duty bound and obliged to make an application to the DRT seeking withdrawal of O.A. No. 354/99. The appellant contends that, in the present case, the proviso has not been complied with by the bank and, consequently, the Possession Notice/Order issued by the authorised officer of the bank under section 13(4) dated 8-1-2005 was illegal and bad in law and liable to be set aside as the said bank could not have invoked the NPA Act without priorpermission/leave of the DRT under the said proviso to section 19(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des for setting up of asset reconstruction companies which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale. The said Act also empowers the said asset reconstruction companies to take over the management of the business of the borrower. The constitu- tional validity of the said Act has been upheld in the case of Mardia Chemicals Ltd. v. Union of India [2004] 4 SCC 3111. After the judgment of this Court in Mardia Chemicals Ltd.'s case (supra), the amending Act 30 of 2004 was inserted. By the said Act 30 of 2004, section 19(1) of the DRT Act was recasted simultaneously with section 13 of the NPA Act, 2002. These amendments were made in order to enable the banks/FIs to withdraw, with the permission of DRT, the O.As. made to it, and thereafter take action under the NPA Act. In the judgment in Mardia Chemicals Ltd.'s case (supra) this Court observed that, in cases where a secured creditor has taken action under section 13(4), it would be open to the borrower to file an application under section 17 of the NPA Act. In the said judgment, this Court further observed that if the borrower, after service of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The secured assets also could not be liquidated in time. In order to empower banks or FIs to liquidate the assets and the secured interest, the NPA Act is enacted in 2002. The enactment of NPA Act is, therefore, not in derogation of the DRT Act. The NPA Act removes the fetters which were in existence on the rights of the secured creditors. The NPA Act is inspired by the provisions of the State Financial Corporations Act, 1951 ('SFC Act'), in particular sections 29 and 31 thereof. The NPA Act proceeds on the basis that the liability of the borrower to repay has crystallized; that the debt has become due and that on account of delay the account of the borrower has become sub-standard and non-performing. The object of the DRT Act as well as the NPA Act is recovery of debt by non-adjudicatory process. These two enactments provide for cumulative remedies to the secured creditors. By removing all fetters on the rights of the secured creditor, he is given a right to choose one or more of the cumulative remedies. The object behind section 13 of the NPA Act and section 17 read with section 19 of the DRT Act is the same, namely, recovery of debt. Conceptually, there is no inherent or impl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the bank's demand for a certain sum of money. Similarly, section 19(8) gives right to the defendant to set a counter claim. Section 19(12) empowers the DRT to make an interim order by way of injunction, stay or attachment before judgment debarring the defendant from transferring, alienating or otherwise deal with, or disposing of his properties and assets. This can be done only with the prior permission of the DRT. Under section 19(13), the DRT is empowered to direct the defendant to furnish security in cases where the DRT is satisfied that the defendant is likely to dispose of the property or cause damage to the property in order to defeat the decree which may ultimately be passed in favour of the bank or FI. Under section 19(18) the DRT is also empowered on grounds of equity to appoint a receiver of any property, before or after grant of certificate for recovery of debt. Under section 19(19), a recovery certificate issued against a company can be enforced by the DRT which can order the property to be sold and the sale proceeds to be distributed amongst the secured creditors in accordance with the provisions of section 529A of the Companies Act, 1956 and pay the balance/sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide for reconstruction of financial assets. It also provides for enforcement of security interest and for matters connected therewith. 16. Section 2(b) defines 'asset reconstruction' to mean acquisition by any securitisation company or reconstruction company of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance. Section 2(f) defines the word 'borrower' to mean the principal borrower who is granted financial assistance by any bank or FI and includes a guarantor, a mortgagor as well as a pledgor. It also includes a person who becomes a borrower of an asset reconstruction company consequent upon acquisition by it of the rights or interest of any bank or FI in relation to financial assistance. The word 'debt' is also defined under section 2(ha) to mean the debt as defined under the DRT Act. Section 2(k) defines 'financial assistance' to mean any loan or advance or any debentures or bonds subscribed or any guarantees given or letters of credit established or any other credit facility extended by any bank or FI. Therefore, asset reconstruction means acquisition by asset reconstruction compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt which is secured by any security interest. Section 2(zf) defines security interest to means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation and assignment. Section 31 of the NPA Act excludes certain items of security interest from the provisions of the NPA Act. 17. Section 5 of the NPA Act deals with acquisition of rights or interest in financial assets by securitisation company or reconstruction company. Section 5A was introduced by Act 30 of 2004. It says that, if any financial asset of a borrower is acquired by a securitisation company or reconstruction company and if such financial asset comprise of secured debts of more than one bank or FI for recovery of which such banks or FIs has filed applications before two or more DRTs then the securitisation company or reconstruction company may file an application to the DRT having jurisdiction for transfer of all pending applications to any one of the several DRTs as it deems fit. Section 5A gives a clue as to the cases in which leave is required to be obtained from DRT by banks/FIs before invoking the NPA Act. Section 5A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (2) of section 13 of NPA Act : "13. Enforcement of Security interest.-****** (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4)." 19. On reading section 13(2), which is the heart of the controversy in the present case, one finds that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non-performing asset then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice failing which the secured creditor shall be entitled to exercise all or any of the rights given in section 13(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPA Act shows that the notice under section 13(2) is not merely a show-cause notice, it is a notice of demand. That notice of demand is based on the footing that the debtor is under a liability and that his account in respect of such liability has become sub-standard, doubtful or loss. The identification of debt and the classification of the account as NPA is done in accordance with the guidelines issued by RBI. Such notice of demand, therefore, constitutes an action taken under the provisions of NPA Act and such notice of demand cannot be compared to a show-cause notice. In fact, because it is a notice of demand which constitutes an action, section 13(3A) provides for an opportunity to the borrower to make representation to the secured creditor. Section 13(2) is a condition precedent to the invocation of section 13(4) of NPA Act by the bank/FI. Once the two conditions under section 13(2) are fulfilled, the next step which the bank or FI is entitled to take is either to take possession of the secured assets of the borrower or to take over management of the business of the borrower or to appoint any manager to manage the secured assets or require any person, who has acquired any of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplex in measure, particularly because rights of each of the secured creditor in the consortium may be required to be looked into. However, if before the DRT, all the secured creditors in such consortium enter into an agreement under section 13(9) then no such further inquiry is required to be made by the DRT. In such cases, the DRT has only to see that all the secured creditors in the consortium are represented under the agreement. The point to be noted is that the scheme of the NPA Act does not deal with disputes between the secured creditors and the borrower. On the contrary, the NPA Act deals with the rights of the secured creditors inter se. The reason is that the NPA Act proceeds on the basis that the liability of the borrower has crystallized and that his account is classified as non-performing asset in the hands of the bank/FI. Section 13(9) also deals with pari passu charge of the workers under section 529A of the Companies Act, 1956, apart from banks and financial institutions, who are secured creditors. Section 13(10) inter alia states that where the dues of the secured creditor are not fully satisfied by the sale proceeds of the secured assets, the secured creditor may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of fees prescribed by the 2002 Rules made under the NPA Act. A proviso is added to section 17(1) by amending Act 30 of 2004. It states that different fees may be prescribed for making the application by the borrower and the person other than the borrower. By way of abundant caution, an Explanation is added to section 17(1) saying that the communication of the reasons to the borrower by the secured creditor rejecting his representation shall not constitute a ground for appeal to the DRT. However, under section 17(2), the DRT is required to consider whether any of the measures referred to in section 13(4) taken by the secured creditor for enforcement of security are in accordance with the provisions of the NPA Act and the Rules made thereunder. If the DRT, after examining the facts and circumstances of the case and the evidence produced by the parties, comes to the conclusion that any of the measures taken under section 13(4) are not in accordance with the NPA Act it shall direct the secured creditor to restore the possession/management to the borrower [vide section 17(3) of NPA Act]. On the other hand, after the DRT declares that the recourse taken by the secured creditor under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13(4) of NPA Act was entitled to prefer an application to the DRT under section 17 of NPA. Similarly, the borrower was required to file an appeal to DRT under section 18 of the NPA Act. For such appeals a borrower was required to pay fees as prescribed by section 20 of the DRT Act read with rule 8 of the Debts Recovery Appellate Tribunal (Procedure) Rules, 1994 ('1994 Rules'). The Central Government, however, found that a borrower who was entitled to carry the matter further against the action taken under section 13(4) was also required to pay court fees which give rise to difficulties and, therefore, it enacted the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Removal of Difficulties) Order, 2004 ('Order 2004') under section 40 of the NPA Act to make provisions for levying fees in the matter of filing of application/appeal under sections 17 and 18 of the NPA Act respectively. We quote hereinbelow the contents of the said Order, 2004 : "Now, therefore, in exercise of the powers conferred by sub-section (1) of section 40 of the said Act, the Central Government hereby makes the following order to make the provisions of levying of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operate, whose effect is considered hereinafter. Points for determination : 25. Three points arise for determination in these cases. They are as follows: (i)Whether the banks or financial institutions having elected to seek their remedy in terms of DRT Act, 1993 can still invoke the NPA Act, 2002 for realizing the secured assets without withdrawing or abandoning the O.A. filed before the DRT under the DRT Act. (ii)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 immovable property. (iii)Whether ad valorem court fee prescribed under Rule 7 of the DRT (Procedure) Rules, 1993 is payable on an application under section 17(1) of the NPA Act in the absence of any rule framed under the said Act. Findings : (i) On Point No. 1 : 26. Mr. K.V. Viswanathan, learned counsel for the appellant in the lead matter submitted that the banks or FIs cannot be permitted to avail of the remedy under the NPA Act when they have already invoked the jurisdiction of the DRT Act. He urged that it was mandatory for the respondent-bank (Indian Overseas Bank) to withdraw the said O.A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that when NPA Act was enacted in 2002, section 13(3A) and the provisos to section 19 of the DRT Act were not there on the statute book. The constitutional validity of the Act was upheld in Mardia Chemicals Ltd.'s case (supra). However learned counsel invited our attention to Para 80 of the judgment of this Court in Mardia Chemicals Ltd.'s case (supra) which states that, before taking any action, a notice of sixty days was required to be given and after the measures under section 13(4) of the NPA Act have been taken a mechanism had been provided under section 17 of the NPA Act to approach the DRT. The object behind the above provisions was to give reasonable protection to the borrower. Placing reliance on Para 80 of the said judgment, learned counsel urged that in the said paragraph this Court has used the expression 'action' in juxtaposition to the words 'measures adopted under section 13(4)', therefore, even this Court did not understand the word notice under section 13(2) as 'action' taken. Learned counsel urged that 'action taken' under section 13 of the NPA Act can only be the steps taken by the bank or FI under section 13(4) and, therefore, notice of sixty days under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction for its recovery; that a debt is a right in the strict sense corresponding to the duty of the debtor to pay, whereas a right of action is a legal authority corresponding to the liability of the debtor to be sued, therefore, according to the learned counsel, the two are distinct concepts which is clear from the fact that, the right of action can stand destroyed by prescription while the debt remains. Applying these concepts to the scope of the NPA Act, learned counsel urged that the NPA Act only gives certain powers to the bank/ FI to enforce a recovery of debt and for that purpose it excludes section 69 of the T.P. Act vis-a-vis certain acts specified therein. Therefore, it was urged that, when section 13(2) notice is issued, it merely reiterates a right to debt which has accrued to the secured creditor. According to the learned counsel, the most important words find place in the proviso to section 19(1) to the DRT Act are 'if no such action had been taken'. Learned counsel places reliance on these words in support of his contention that, there is no need to apply for withdrawal of the O.A. where the recovery stands enforced. Learned counsel urged that, mere giving of a notic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... states that the withdrawal of the O.A. is for the purpose of taking action under the NPA Act. Learned counsel urged that, in view of section 19(25) of the DRT Act, it cannot be said that the DRT has no inherent powers. Learned counsel submitted that the doctrine of election is a branch of the rule of estoppel. It was urged that, the said doctrine postulates that when two remedies are available for the same relief, the aggrieved party has an option to elect either of the two but not both. In this connection, reliance was placed on the judgments of this Court in the case of National Insurance Co. Ltd. v. Mastan [2006] 2 SCC 641 and A.P. State Financial Corpn. v. Gar Re-Rolling Mills [1994] 2 SCC 647. Learned counsel, therefore, urged that the proviso to section 19(1) mandates that either one of the two remedies can be resorted to at a time but not both and in view of the statutory interventions, there is no option with the secured creditor but to withdraw the DRT proceedings to cases where the proviso to section 19(1) of DRT Act is applied. 28. The above submissions of the learned counsel for the appellant (M/s. Transcore) was adopted by Mr. Pankaj Gupta, learned counsel for M/s. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout the intervention of the court/Tribunal. He urged that if the proviso to section 19(1) of the DRT Act is read as mandatory, then the consequence would be that a secured creditor can have recourse to section 13 only with the prior permission of the DRT which would defeat the very object of the NPA Act which is to remove all fetters, if any, on the right of enforcement by the secured creditor. It was next urged that the DRT does not have inherent powers and that section 19(25) of the DRT Act which empowers the Tribunal to issue appropriate directions for enforcement of its orders is not akin to section 151 CPC and, therefore, a provision akin to the provision was necessary to be inserted. In this connection, learned senior counsel submitted that, in the DRT Act there was no provision similar to order XXIII CPC and to get rid of that lacuna, the DRT Act had to be amended. He urged that the proviso to section 19 is an enabling provision. The bank/ FI may apply to the DRT for withdrawal of the O.A. in cases where the DRT has appointed a court receiver or in cases where the DRT had granted attachment or injunction. If the bank/FI seeks to invoke the NPA Act vis-a-vis a financial as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... several situations whereas the proviso to section 19 deals with some aspects/situations only. In this connection, learned counsel submitted that section 13(10) provides for a fresh cause of action. Inability to realise the entire dues does not provide any fresh cause of action for proceeding under the DRT Act. The course of action for proceeding under the DRT Act is the debt due. Not satisfying the dues fully, according to the learned counsel, is not a cause of action attributable to the borrower. He, therefore, submitted that proviso to section 19(1) is not a condition precedent to taking recourse to NPA Act. Learned counsel further pointed out that, section 36 of NPA Act talks of limitation. Section 36 of NPA Act makes it clear that no action under NPA Act can be taken unless the claim is within limitation and, therefore, according to the learned counsel, the time spent in adopting action under DRT Act is not excluded and it does not stop the limitation. Therefore, it is urged that this aspect also indicates that the proviso to section 19(1) is not a condition precedent to taking recourse to NPA Act. On the question of doctrine of election, learned counsel submitted that, the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e recovery application and but for a specific provision, it was not open to the Tribunal to entertain an application for withdrawal and, in any case, it was not open to the Tribunal to pass conditional order on such application for withdrawal without express provision in that regard, which now is the proviso to section 19(1) of the DRT Act. Therefore, to till this lacuna, the proviso was inserted in section 19(1). The proviso makes it very clear that the withdrawal of the O.A. shall be limited to the purpose of taking action under the NPA Act. It clarifies that such application for withdrawal may be made if no action has been taken under the NPA Act before seeking withdrawal. Learned senior counsel urged that the said proviso does not compel the withdrawal of the O.A. before having recourse to NPA Act either before 11-11-2004 or thereafter. He submitted that reading the proviso of section 19(1) of the DRT Act as a condition precedent for taking recourse to the NPA Act would have serious adverse effects, for example, in a given case relief might have been claimed against the guarantors also, those guarantors may be specific to one of the consortium transactions. Compelling the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutory provisions or by the doctrine of election; that in the absence of any bar, it is open to the creditor to choose one or more of the cumulative remedies. Learned senior counsel submitted that under the scheme of NPA Act, a bank/FI is under no disability to take recourse under section 13 of NPA Act even after it has invoked section 19 of DRT Act. He submitted, that the object of both the sections is to recover dues; that there is no inconsistency inherent or implied in the two remedies; that the doctrine of election applies in cases of inconsistent remedies. He submitted that in the present case, the two remedies are not inconsistent to each other. He submitted that the judgment of this Court in the case of A.P. State Financial Corpn. (supra) has no application because in that case this Court has held that the State Financial Corporation Act has expressly provided for the doctrine of election. Learned counsel submitted that the doctrine of election is a doctrine evolved by courts on equity. It is based on the principle that a man shall not be allowed to approbate and reprobate. If a person has chosen a particular remedy and has intentionally relinquished another remedy, he is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, section 13(3A) becomes necessary because it gives an opportunity to the borrower to object to the notice. Learned counsel submitted that the NPA Act deals only with secured assets whereas the DRT Act deals with both secured and non-secured assets. He submitted that a secured asset is an asset which is owned by the bank/FI and, therefore, it can act without intervention of the court. Learned counsel, urged that in certain respects, the DRT Act did not provide for the remedies, which led to the enactment of the NPA Act. In this connection, he cited the example of takeover of management of the business of the borrower which is provided for only in the NPA Act and not in the DRT Act. 33. Shri D. Dave, learned senior counsel appearing for Indian Bank Association (IBA) submitted, that NPA Act has to operate de hors the DRT Act; that both the Acts operate within the same scheme but the DRT Act is a general Act whereas the NPA Act is the special Act. He submitted that a bank/FI is entitled to go back to the DRT under section 13(10) which indicates that the NPA Act is a special Act vis-a-vis the DRT Act which is the general Act. He urged that the NPA Act is amplification of DRT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPA Act shall be treated as an additional Act. The NPA Act is made in addition to the Companies Act, 1956, the SEBI Act, 1992, the DRT Act, 1993 as well as the Securities Contracts (Regulation) Act, 1956 and, therefore, the doctrine of election has no application in this case. Learned counsel submitted that the very object for enacting the NPA Act is to introduce banking reforms including change in the DRT Act so as to include the provisions of the NPA Act therein and, therefore, withdrawal of the O.A. is not a condition precedent for invoking NPA Act. 34. Shri Rajiv Shakdhar, learned senior counsel appearing for ICICI Bank Ltd. submitted that rule 2(b) of the Security Interest (Enforcement) Rules, 2002 ('2002 Rules') states that a demand notice is the notice in writing issued by a secured creditor to any borrower pursuant to section 13(2) of the NPA Act. Reliance is placed on the said rule to show that the notice under section 13(2) is not a mere show-cause notice, that it is a demand notice similar to section 156 of the Income-tax Act. In this connection, learned counsel submitted, that section 22 of the NPA Act refers to default in repayment of debt on the part of the borrower ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pearing on behalf of the Punjab National Bank, submitted that the doctrine of election is for banks/FIs and not for borrowers. The reason is that a creditor has to see his debtor, it is the right of the bank to liquidate the asset which right is unfettered once a security or interest is created in favour of the bank/FI. [See Abdul Azeez v. Punjab National Bank [2005] 127 Comp. Cas. 514 1 (Ker.)]. Learned counsel submitted that the purpose of enacting proviso to section 19(1) is to bring in Order XXIII CPC. Learned counsel submitted that the doctrine of election applies only in case of inconsistent remedies and not in case of additional remedies. He urged that withdrawal of an application could be a condition precedent for alternate remedy, however, it cannot be a condition precedent for taking recourse to an additional remedy. Learned counsel urged that unlike SICA, in the NPA Act, 2002 there is no proviso saving limitation, and, therefore, if the argument of the borrowers is accepted, it could lead to a situation where the banks' action under NPA Act would be time-barred. In any event, NPA Act, according to the learned counsel, is a later enactment and, therefore, it shall prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al right of action against the third party. Security over the asset (property) may be obtained by mortgage, charge, pledge, lien etc. Security in the form of right of action against a third party is known as guarantee. Broadly, there are three types of security over the asset. One is where the creditor obtains interest in the asset concerned (mortgage). Second is securities in which the rights of the creditor depends on possession of the asset (pledge/lien). The third is charge where the creditor neither obtains ownership nor possession of the asset but the asset is appropriated to the satisfaction of the debt or obligation in question (charge). The dichotomy, which is of importance, is that more than one obligation could arise on the same transaction, namely, to repay the debt or to discharge some other obligation. 41. Therefore, when section 13(4) talks about taking possession of the secured assets or management of the business of the borrower, it is because a right is created by the borrower in favour of the bank/FI when he takes a loan secured by pledge, hypothecation, mortgage or charge. For example, when a company takes a loan and pledges its financial asset, it is the duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Equity (Thirty-first Edition, page 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application. 43. In our view, the judgments of the High Courts which have taken the view that the doctrine of election is applicable are erroneous and liable to be set aside. 44. We have already analysed the scheme of both the Acts. Basically, the NPA Act is enacted to enforce the interest in the financial assets which belongs to the bank/FI by virtue of the contract between the parties or by operation of common law principles or by law. The very object of section 13 of NPA Act is recovery by non-adjudicatory process. A secured asset under NPA Act is an asset in which interest is created by the borrower in favour of the bank/FI and on that basis alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith. 46. The object behind introducing the first proviso and the third proviso to section 19(1) of the DRT Act is to align the provisions of DRT Act, the NPA Act and Order XXIII CPC. Let us assume for the sake of argument, that an O.A. is filed in the DRT for recovery of an amount on a term loan, on credit facility and on hypothecation account. After filing of O.A., on account of non-disposal of the O.A. by the Tribunal due to heavy backlog, the bank finds that one of the three accounts has become sub-standard/loss, in such a case the bank can invoke the NPA Act with or without the permission of the DRT. One cannot lose sight of the fact that even an application for withdrawal/leave takes time for its disposal. As stated above, with inflation in the economy, value of the pledged property/asset depreciate on day to day basis. If the borrower does not provide additional asset and the value of the asset pledged keeps on falling then to that extent the account becomes non-performing. Therefore, the bank/FI i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns the borrower not to deal with the property. Learned advocates submitted that notice in terms of rule 8(1) of the 2002 Rules operates as attachment. It contemplates a symbolic possession. Learned advocates submitted that actual physical possession of immovable assets can be taken under rule 8(3), in cases where there is a vacant plot or a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice under rule 8(1); that actual physical possession is to be delivered only alter confirmation of sale under rule 9(6) read with Appendix V under which the authorised officer is empowered to deliver the property to the purchaser free from all encumbrances in terms of rule 9(9) of the 2002 Rules. Learned advocates, therefore, submitted that the High Court was right in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice under section 13(4) of the NPA Act so as to defeat the adjudication of his claim by the DRT under section 17 of NPA Act, and that, physical possession ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x V to the 2002 Rules. Rule 9(9) states that the 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 NPA Act refers to right of appeal. Section 17(3) states that if the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of disputes which are sought to be avoided by 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. (iii) On Point No. 3, on question of court fee : 53. Whether ad valorem court fee prescribed under rule 7 of the DRT (Procedure) Rules, 1993 is payable on an application under section 17(1) of the NPA Act in the absence of any rule framed under the NPA Act. 54. Mr. N.C. Sahni supplemented by Mr. Pankaj Gupta, learned advocates appearing on behalf of the borrower submitted that by virtue of the amending Act 30 of 2004 with effect from 11-11-2004, the persons aggrieved against the action of the bank or FI initiated under section 13(4) of the NPA Act have a right to adjudication by way of an application to the DRT under section 17(1) of the NPA Act. It is submitted that in exercise of powers conferred under section 40(1) of the NPA Act, the Central Government has issued an Order called the "Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Removal of Difficulties) Order, 2004 ("Order 2004") ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia that a borrower aggrieved by action taken under section 13(4) may make an application along with fees, as may be prescribed to the DRT having jurisdiction in the matter. It is true that, the marginal note states that section 17(1) is a right to appeal. In our view, the marginal note to section 17(1) cannot control the text and the content of section 17(1) which, as stated above, states that the borrower aggrieved by any of the measures in section 13(4) may make an application to the DRT. The judgment of this Court in Mardia Chemicals Ltd.'s case (supra) states that the DRT acts in an Original Jurisdiction under section 17 of the NPA Act. In our opinion, as far as the levy of fee is concerned, the terminology makes no difference. In fact, the proviso to section 17(1) indicates that different fees may be prescribed for making an application by the borrower. The reason is obvious. Certain measures taken under section 13(4) like taking over the management of the fee vis-a-vis the secured creditor taking possession of financial assets have to bear different fees. Each measure is required to be separately charged to the borrower (applicant) for which different fees could be pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the rapidly increasing responsibilities of a welfare democratic State, the Legislature has to turn out a plethora of hurried legislation, the volume of which is often matched with its complexity. Under conditions of extreme pressure, with heavy demands on the time of the Legislature and the endurance and skill of the draftsman, it is well nigh impossible to foresee all the circumstances to deal with which a statute is enacted or to anticipate all the difficulties that might arise in its working due to peculiar local conditions or even a local law. This is particularly true when Parliament undertakes legislation which gives a new dimension to socio-economic activities of the State or extends the existing Indian laws to new territories or areas freshly merged in the Union of India. In order to obviate the necessity of approaching the Legislature for removal of every difficulty, howsoever trivial, encountered in the enforcement of a statute, by going through the time-consuming amendatory process, the Legislature sometimes thinks it expedient to invest the Executive with a very limited power to make minor adaptations and peripheral adjustments in the statute, for making its implemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income-tax laws of the merged States were not repealed by the Indian Income-tax Act but by the Taxation Laws (Extension to Merged States and Amendment) Act 67 of 1949. Owing to this, the depreciation actually allowed under the laws of the merged States could not be taken into account in computing the aggregate depreciation allowance referred to in sub-section (2)(vi), proviso (c) or the written down value under clause (b) of sub-section (5) of section 10 of the 1922 Act. If this difficulty had not been removed, anomalous results would have followed. The written down value of the assets acquired before the previous year would have been taken as the original cost of the assets without deduction of the depreciation actually allowed in the past under the State laws. This would have given to the assessees in the merged States, a benefit, inconsistently with the scheme of section 10 of the 1922 Act, exceeding in the aggregate even the original cost of the assets. The 1949 Order removed this difficulty. In terms, it did no more than directing that if under the income-tax laws of a merged State any depreciation was actually allowed, it was to be taken into account in ascertaining the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her held that the doctrine of election would not be attracted under the SFC Act in view of the expression "without prejudice to the provisions of section 29" being used in section 31. However, this Court observed that the Corporation has a right to choose initially whether to proceed under section 29 or section 31, but its rights under section 29 are not extinguished, if it decides to take recourse to section 31. The Corporation can abandon the proceedings under section 31 at any stage. This Court further held that a decree under section 31 is not a money decree and, therefore, recourse to section 31 cannot debar the Corporation from taking recourse to section 29 by not pursuing section 31. It is also observed that debtor cannot claim equity. 61. In our view, the judgment in AP State Financial Corporation's case (supra) has no application to the present case. Under the SFC Act, section 31 uses the expression "without prejudice to the provisions of section 29", therefore, it is held, in the above judgment that section 29 is wider in scope than section 31 which concerns attachment before judgment. Sections 29 and 31 find place in the same Act. Section 31 operates in an area carved o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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