TMI Blog2006 (11) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... D 3228 OF 2006 - - - Dated:- 29-11-2006 - ARIJIT PASAYAT AND S.H. KAPADIA, JJ. Soli J. Sorabjee, Ranjit Kumar, C.A. Sundram, K.V. Viswanathan, Atul Kumar Sinha, B. Raghunath, Rajeev Kumar, Devendra Singh, Gautam Awasthi, D. Mahesh Babu, Himanshu Munshi, Ms. J.S. Wad, Ashish Wad, Neeraj Kumar, Arvind Gupta, S.S. Ray, Ms. Rakhi Ray, Dhruv Mehta, Harshvardhan Jha, Yashraj Deora and Manoj Mehta for the Appellant. K.N. Bhatt, Rajiv Shakdhar, D. Dave, K.N. Balgopal, Ajit Pudussery, Avinash Kumar, K. Vijayan, Ms. Rashi Malhotra, I. Bishnu, Ramesh Singh, Ms. Nina Gupta, Ms. Shweta Chadha, Ms. Akansha, A.K. Jaiswal, Rajesh K. Sharma, Ms. Shalu Sharma, Senthil Jagdeesan and A.P. Mohanty for the Respondent. Pankaj Gupta, Pramod Dayal, N.C. Sahni and Y.P. Dhingra for the Intervention. JUDGMENT S.H. Kapadia, J. - A short question of public importance arises for determination, namely, whether withdrawal 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 Inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntor were directed not to deal with those immovable properties. By the said possession notice, the public in general were also told not to deal with the properties mentioned in the Notice as they were subject to the charge of the bank for the aforesaid amount with interest and cost. The immovable properties were put to auction. However, pending civil appeal, confirmation of auction sale had been stayed. 5. As far as M/s. Transcore, the appellant herein, is concerned, the argument is that the respondent-bank (Indian Overseas Bank) could not have invoked the NPA Act under the above proviso to section 19(1) of the DRT Act without the prior permission of the Tribunal before whom O.A. 354/99 was pending. The contention of the appellant is, that prior to the insertion of the proviso on 11-11-2004, the bank had issued a show-cause notice under section 13(2) of the NPA Act, that Notice dated 6-1-2003 was merely a show-cause notice and such a notice 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferent degrees of credit risk. Payments to the investors depend upon the performance of the specified underlying exposures, as opposed to being derived from an obligation of the entity originating those exposures". In the context of securitisation of Standard Assets, Reserve Bank of India has defined securitisation as "a process by which a single performing asset or a pool of performing assets are sold...." Reasons for Enactment of the NPA Act, 2002 : 8. The NPA Act, 2002 is enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith. The NPA Act enables the banks and FIs to realise long-term assets, manage problems of liquidity, asset liability mismatch and to improve recovery of debts by exercising powers to take possession of securities, sell them and thereby reduce non-performing assets by adopting measures for recovery and reconstruction. The NPA Act further provides 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the bank or FI. It represents an amount receivable and realizable by the banks or FIs. In that sense, it is an asset in the hands of the secured creditor. Therefore, the NPA Act, 2002 was primarily enacted to reduce the non-performing assets by adopting measures not only for recovery but also for reconstruction. Therefore, the Act provides for setting up of asset reconstruction companies, special purpose vehicles, asset management companies etc. which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale. It also provides for realization of the secured assets. It also provides for take over of the management of the borrower company. 10. There is one more reason for enacting NPA Act, 2002. When the civil courts failed to expeditiously decide suits filed by the banks/FIs, Parliament enacted the DRT Act, 1993. However, the DRT did not provide for assignment of debts to securitization companies. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by it, withdraw the O.A. for the purpose of taking action under the NPA Act, if no such action has been taken earlier under that Act. Under the second proviso, it is further provided that, any application made for withdrawal to the DRT under the first proviso shall be dealt with expeditiously and shall be disposed of within thirty days from the date of such application. The reason is obvious. Under section 36 of the NPA Act the bank or FI is entitled to take steps under section 13(4) in respect of the financial asset provided it is made within the period of limitation prescribed under the Limitation Act, 1963. Therefore, the second proviso to section 19(1) states that the DRT shall decide the withdrawal application as far as possible within thirty days from the date of application by the bank or FI. The third proviso to section 19(1) states that in case the DRT refuses to grant permission/leave for withdrawal, it shall give reasons thereof section 19(6) provides for the defendant s claim to set-off against 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 inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned therein are complementary to each other. The DRT Act provides for adjudication. It provides for adjudication of disputes as far as the debt due is concerned. It covers secured as well as unsecured debts. However, it does not rule out applicability of the provisions of the T.P. Act, in particular sections 69 and 69A of that Act. Further in cases where the debt is secured by pledge of shares or immovable properties, with the passage of time and delay to the DRT proceedings, the value of the pledged assets or mortgaged properties invariably falls. On account of inflation, value of the assets in the hands of the bank/FI invariably depletes which, in turn, leads to asset liability mis-match. These contingencies are not taken care of by the DRT Act and, therefore, Parliament had to enact the NPA Act, 2002. Analysis of the NPA Act, 2002 : 15. We have already discussed the statement of objects and reasons for enacting the NPA Act, we need not repeat. The NPA Act has been enacted to regulate securitisation and to provide for reconstruction of financial assets. It also provides for enforcement of security interest and for matters connected therewith. 16. Section 2( b ) defi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... originator to mean the owner of a financial asset which is acquired by a reconstruction company or asset management company for the purposes of the NPA Act. Similarly, an obligor is defined under section 2( q ) to mean a person who is liable to the originator. A borrower is an obligor whereas a secured creditor, namely, a bank or FI is the originator who is the owner of a financial asset. This section also indicates that banks/FIs are the owners of the financial assets. It is only when these assets in the hands of the bank or FI becomes sub-standard, doubtful or loss then the account or the asset becomes classifiable as a non-performing asset and it is only then the NPA Act comes into operation. Section 2( z ) defines securitisation to mean acquisition of financial assets by any asset reconstruction company from any originator (bank/FI). Section 2( zc ) defines secured asset to mean the property on which security interest is created. Section 2( zd ) defines secured creditor to mean any bank or FI. Section 2( ze ) defines a secured debt to mean a debt which is secured by any security interest. Section 2( zf ) defines security interest to means right, title and interest of any kin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 11 deals with resolution of disputes relating to securitisation, reconstruction or non-payment of any amount due between the bank or FI or securitisation company or reconstruction company. It further states that such disputes shall be resolved by conciliation or arbitration. It is important to note that the dispute contemplated under section 11 of NPA Act is not with the borrower section 12 empowers RBI to give directions from time to time. Classification of an account as non-performing asset has to be done by the bank or FI in terms of the guidelines issued by RBI. 18. Section 13 falls in Chapter III which deals with enforcement of security interest. It begins with a non obstante clause. It states inter alia that notwithstanding anything contained in section 69 or section 69A of the T.P. Act, any security interest created in favour of any secured creditor may be enforced, without the court s intervention, by such creditor in accordance with the provisions of this Act. When we refer to the word court , it includes DRT. We quote hereinbelow sub-section (2) of section 13 of NPA Act : "13. Enforcement of Security interest. ****** (2) Where any borrower, who is under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /FI. In the event of non-payment of secured debts by the borrower, notice under section 13(2) is given as a notice of demand. It is ery similar to notice of demand under section 156 of the Income-tax Act, 1961. After classification of an account as NPA, a last opportunity is given to the borrower of sixty days to repay the debt. Section 13(3A) inserted by amending Act 30 of 2004 after the judgment of this Court in Mardia Chemicals Ltd. s case ( supra ), whereby the borrower is permitted to make representation/objection to the secured creditor against classification of his account as NPA. He can also object to the amount due if so advised. Under section 13(3A), if the bank/FI comes to the conclusion that such objection is not acceptable, it shall communicate within one week the reasons for non-acceptance of the representation/objection. A proviso is added to section 13(3A) which states that the reasons so communicated shall not confer any right upon the borrower to file an application to the DRT under section 17. The scheme of sub-sections (2), (3) and (3A) of section 13 of NPA Act shows that the notice under section 13(2) is not merely a show-cause notice, it is a notice of deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovides for payment of surplus to the person entitled thereto. Section 13(8) inter alia states that if the dues of the secured creditor together with all costs, charges and expenses incurred are tendered to the secured creditor before the debt fixed for sale/transfer, the secured asset shall not be sold or transferred by the bank/FI to the asset reconstruction company and no further steps shall be taken in that regard. Section 13(9) inter alia states that where a financial asset is funded by more than one bank/FI or in case of joint financing by a consortium, no single secured creditor from that consortium shall be entitled to exercise right under section 13(4) unless exercise of such right is agreed upon by all the secured creditors. Section 13(9) provides for one more instance when permission of DRT may be required under the first proviso to section 19(1) of the DRT Act. The agreement between the secured creditors in such cases is required to be placed before the DRT not as a fetter on the rights of the secured creditors but out of abundant caution. Generally, such agreements are complex in measure, particularly because rights of each of the secured creditor in the consortium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets under the NPA Act. Section 13(13) states that, no borrower shall, after receipt of notice under section 13(2), transfer by way of sale, lease or otherwise any of his secured assets referred to in the notice, without prior written consent of the secured creditor. Thus, section 13(13) further fortifies our view that notice under section 13(2) is not merely a show-cause notice. In fact, section 13(13) indicates that the notice under section 13(2) in effect operates as an attachment/injunction restraining the borrower from disposing of the secured assets and, therefore, such a notice, which in the present case is dated 6-1-2003, is not a mere show-cause notice but it is an action taken under the provision of the NPA Act. 21. Section 17 of NPA Act confers right to appeal. It inter alia states that any person including borrower, aggrieved by exercise of rights by the secured creditor under section 13(4), may make an application to the DRT as an appellate authority within forty-five days from the date on which action under section 13(4) is taken. That application should be accompanied by payment of fees prescribed by the 2002 Rules made under the NPA Act. A proviso is added ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laws are inconsistent with the NPA Act. As far as the present case is concerned, the remedies are complimentary to each other and therefore, the doctrine of election has no application to the present case. 23. In the present matter, there is a controversy with regard to payment of court fee in the matter of appeal to the appellate Tribunal against the action taken under section 13(4) of the NPA Act. In this connection, certain facts are required to be stated. On 21-6-2002 the NPA Act came into force. As stated above, any person including borrower aggrieved by action taken under section 13(4) of NPA Act is entitled to move the Tribunal in appeal under section 17(1) of NPA Act. The Tribunal being established under section 3(1) of the DRT Act. This aspect is important. The Tribunal under the DRT Act is also the Tribunal under the NPA Act. Under section 19 of the DRT Act read with rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993 ( 1993 Rules ), the applicant bank or FI has to pay fees for filing such application to DRT under the DRT Act and, similarly, a borrower, aggrieved by an action under section 13(4) of NPA Act was entitled to prefer an application to the DRT un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (1) of section 18 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 appeal to the Debts Recovery Appellate Tribunal under rule 8 of the Debts Recovery Appellate Tribunal (Procedure) Rules, 1994." 24. It is interesting to note that the 2004 Order came into force with effect from 6-4-2004. This Order has continued even after amending Act 30 of 2004 which, as stated above, came into force with effect from 11-11-2004. As stated above, by the said amending Act 30 of 2004 an avenue to challenge was provided to any person including a borrower, who is aggrieved by any of the measures taken by the secured creditor under section 13(4), subject to his paying fees along with his application. The fee is to be levied in the manner prescribed. Under section 2( s ) of NPA Act, the word prescribed has been defined to mean prescribed by the Rules made under the NPA Act. Till today, there are no rules prescribing the court fees for filing applications to the Tribunal under section 17(1). Till today, the 2004 Order continues to operate, whose effect is considered her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, the notice under section 13(2) dated 6-1-2003 is the show-cause notice, it is not an action in terms of the above proviso and, therefore, in the present case, the bank ought to have taken permission from the DRT before invoking the NPA Act. Similarly, in the said proviso the words are that the bank or FI may, with the permission of the DRT, withdraw the O.A. for the purpose of taking action under the NPA Act, learned counsel urged that, this proviso read as a whole indicates applicability of the doctrine of election. Learned counsel urged that, the very object of enacting the proviso was that two parallel procedures cannot simultaneously be resorted to unless leave is granted in that regard by the DRT under the said proviso. According to the learned counsel, the second proviso to section 19(1) inter alia states that, the application made by the bank or FI seeking withdrawal of the O.A. shall be dealt with as expeditiously as possible. Reliance on second proviso was placed in support of the argument that if the bank or FI is permitted to invoke both the remedies simultaneously, then the very object of expeditious disposal would stand defeated. It was further urged that when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... points out that section 13(3A) bars an appeal against the order communicating reasons or against the likely action of the secured creditor. Since no appeal is provided for against the order rejecting representation and since section 17 of the NPA Act provides remedy to the borrower only against action taken under section 13(4), the scheme of section 13 suggests that the notice under section 13(2) should be read only as a show-cause notice. Similarly, reliance is placed by the learned counsel on the provisions of section 13(10) of the NPA Act which states that where the dues of the secured creditor are not fully satisfied, the secured creditor may file an application to the DRT for the recovery of the balance. Learned counsel submitted that section 13(1) shows that simultaneous action for enforcement of security interest was not contemplated by the NPA Act. It was further urged, that even conceptually there is a difference between the right to debt and the right to take action of recovery; that these two concepts are totally different concepts; that one is a right to receive and the other is a right to enforce. Learned counsel urged, that a debt is not the same thing as a right of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was urged that even assuming for the sake of argument that section 13(2) notice creates a right to take action, such a right is not a vested right and is at best contingent on other factors, namely, continuation of action by secured creditors even after representations. The proviso to section 19 of the DRT Act speaks only of concluded action under section 13(4) of the NPA Act to prevent closed transactions from being reopened. In this connection, learned counsel submitted that the right vests when all the facts have occurred. Whereas a right is contingent when some but not all the vestitive facts have occurred. Learned counsel urged, that section 13(2) refers to a right, at the highest, at an inchoate stage; that section 13(4) only refers to section 13(2) in the context of the period fixed; that before introduction of section 13(3A) no opportunity, to represent was there and, consequently, section 13(2) notice is only a show-cause notice. 27. Learned counsel further submitted that, the proviso to section 19 of the DRT Act is the statutory recognition of the doctrine of election; it is not a simple withdrawal procedure as set out in Order XXIII CPC because the proviso to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted under section 13(2) as the said section deals with enforcement of security interest alone which security interest is recognized by the Act as a financial asset of the bank/FI. In the circumstances, learned counsel urged that section 13(2) notice is not a mere show-cause notice. He submitted that, the purpose of NPA Act is to enable the secured creditor to enforce any security interest without the intervention of the court or the Tribunal apart from creation of asset reconstruction company and securitisation company. In this connection, it was pointed out that sub-section (4)( a ) of section 13 of the NPA Act permits a bank/FI to take possession of the secured assets. Similarly, sub-section (4)( b ) enables a bank/FI to take over management of the business of the borrower. Similarly, sub-section (4)( c ) permits appointment of a manager to manage the secured assets, the possession of which has been taken over and, similarly, sub-section 4( d ) authorizes the secured creditor to require any transferee of the secured assets to pay the secured creditor the specified amount by just a return notice. According to the learned senior counsel, under the scheme of section 13(4), all these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven part withdrawal of the suit/application is permissible. He further submitted that, under section 13(10) of the NPA Act where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the bank/FI may file an application to the DRT for recovery of the balance from the borrower. The point which is emphasized is that part withdrawal of the suits or the invocation of DRT jurisdiction for recovery of the balance are aspects which required an amendment to be carried out in the DRT Act as well as in the NPA Act so that the provisions are brought at par with order XXIII CPC. This was the main object behind the enactment to the first proviso to section 19(1) to the DRT Act. In fact, it is pointed out by the learned counsel that the amending Act 30 of 2004 has made changes in both the DRT Act and the NPA Act simultaneously which indicates that both the Acts complement each other. He submitted that the enabling provision under the first proviso had to be made so that withdrawal is restricted to cases where the bank/FI wishes to withdraw the O.A. for the purpose of taking action under the NPA Act and not for any other purpose. It is pointed out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich excludes ten types of securities from the purview of NPA Act. He submitted that the NPA Act is the special Act whose provisions override all other laws inconsistent therewith. In this connection, he places reliance on section 35 of the NPA Act. Learned counsel urged, that Act 30 of 2004 amended the NPA Act as well as the DRT Act simultaneously; that the said Act 30 of 2004 specifically amended section 13 by insertion of sub-section (3A), however, no provision corresponding to the proviso to section 19 was introduced into the NPA Act, which indicates that Parliament did not intend to dilute rights of the secured creditors granted to them under the NPA Act through DRT Act. He also invited our attention to section 37 of the NPA Act which provides that the NPA Act shall be in addition to and not in derogation of the DRT Act. Learned counsel urged, that the proviso to section 19(1) was introduced in DRT Act to make it more effective; that provision is akin to order XXIII CPC, which was not there in the original DRT Act. As stated above, learned counsel urged that DRT unlike a court has no inherent powers. Learned counsel urged that there may be innumerable situations in which the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the prior permission of DRT would make the NPA Act redundant. Learned senior counsel urged that section 24 of the DRT Act makes the Limitation Act, 1963 applicable to claims before the DRT. This means that, by the time the pending recovery application is allowed to be withdrawn, an application under section 13(10) of NPA Act would become time-barred. Thus, the banks/FIs, if compelled to withdraw the recovery applications before resorting to section 13, will be deprived of their rights to recover the balance amount under section 13(10). In this connection, reliance was also placed on the provisions of section 36 of the NPA Act which requires the claims to be made under NPA Act within the period prescribed under the Limitation Act, 1963. Learned counsel, therefore, submitted that there is no merit in the contention of the appellant that the banks/FIs should be compelled to first withdraw their O.As. before resorting to section 13 of NPA Act. 31. Mr. Soli J. Sorabjee, learned senior counsel appearing on behalf of Indian Bank, submitted that the doctrine of election does not apply to curative relief. He submitted, that a creditor is entitled to choose one or more cumulative rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uris Secundam, Vol. XXVIII, para 13; American Jurisprudence, 2d, Vol. 25 and Snell s Principles of Equity, Twenty-Eighth Edition, page 495. Learned counsel urged that the interpretation suggested by the borrowers would not subserve the object of the NPA Act which is enacted for speedy recovery of debts. If a bank/FI is compelled or mandatorily required to withdraw its application under the proviso to section 19 of DRT Act and, thereafter, invoke NPA Act, it would face a situation where section 13(10) would fail. It would lead to further complications which would involve questions of limitation and delay in the speedy recovery of its dues. Learned counsel urged that the conclusion drawn by the Punjab Haryana High Court in the case of Kalyani Sales Co. v. Union of India was erroneous because it states that once the bank/FI decides to proceed under the NPA Act, that Act imposes an obligation on the bank/FI to withdraw the O.A. under section 19 of DRT Act. 32. Mr. Ranjit Kumar, learned senior counsel, appearing for Indian Bank, submitted that if notice under section 13(2) of NPA Act was only a show-cause notice then section 13(3A) was not required. He submitted that beca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is put into service to show that at every stage, Parliament has ousted the jurisdiction of the courts and DRT to get the NPA liquidated at the earliest opportunity. Learned senior counsel submitted, that section 19 of the DRT Act concerns the procedure which has to be followed by the Tribunal; that it is a procedural section and, therefore, section 19 of DRT Act cannot confer or allow jurisdiction to be retained by the Tribunal. He submitted that by section 13(3A), Parliament has made a conscience decision that there will be no interference from DRT/court at any stage, therefore, it states that a borrower cannot approach DRT against communication of reasons by a bank/FI which shows that in the matter of NPA, Parliament has ruled out intervention by courts and Tribunals. Learned senior counsel submitted that calling to the borrowers for hearing, the NPA Act shall remain suspended till leave is given by DRT. This interpretation, according to the learned senior counsel, defeats the very object behind enactment of the NPA Act. Lastly, he pointed out that section 35 of NPA Act states that the Act shall override all other laws which are inconsistent with NPA Act. Similarly, section 37 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t NPA Act deals with enforcement of securities and it does not wait for debts to crystallize and, therefore, O.A. filed in the DRT will not be required to be withdrawn in the event action by way of section 13(2) notice is taken even before 11-11-2004. The doctrine of election would not apply to the proceedings under the NPA Act and the DRT Act. It is urged, that the nature, ambit and scope of the proceedings under the two Acts are different; that the legislative purpose for conferring the power on the secured creditors to enforce its security interest by taking recourse to section 13(4) of NPA Act without intervention of the court is to free the secured creditors of the impediments contained in section 69 of the T.P. Act. A secured creditor is now empowered by virtue of section 13 of the NPA Act to take any of the measures including sale of the secured assets without intervention of the court and notwithstanding the limitations of section 69 of the T.P. Act. The power of sale of property in a suit even prior to the passing of decree has been upheld by this Court by placing reliance on order XL rule 1(1)( d ) CPC. In the circumstance, withdrawal of O.A. cannot be made a conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct proceeds on the basis that security interest vests in the bank/FI. Sections 5 and 9 of NPA Act is also important for preservation of the value of the assets of the banks/FIs. Quick recovery of debt is important. It is the object of DRT Act as well as NPA Act. But under NPA Act, authority is given to the banks/FIs; which is not there in the DRT Act, to assign the secured interest to securitisation company/asset reconstruction company. In cases where the borrower has bought an asset with the finance of the bank/FI, the latter is treated as a lender and on assignment the securitisation company/asset reconstruction company steps into the shoes of the lender bank/FI and it can recover the lent amounts from the borrower. 40. According to Snell s Equity (Thirty-first edition) at page 777, a dual obligation could arise on the same transaction, namely, A s obligation to repay a sum of money to B or some other obligation. In such a case, B can sue A for money or for breach of the obligation. However, B will often have some security which covers the obligation of A, say, in the form of an asset over which B can exercise his rights. B may be entitled to this security either by law or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is different and distinct from the obligation to repay. It is the former obligation of the borrower which attracts the provisions of NPA Act which seeks to enforce it by measures mentioned in section 13(4) of NPA Act, which measures are not contemplated by DRT Act and, therefore, it is wrong to say that the two Acts provide parallel remedies as held by the judgment of the High Court in Kalyani Sales Co. s case ( supra ). As stated, the remedy under DRT Act falls short as compared to NPA Act which refers to acquisition and assignment of the receivables to the asset reconstruction company and which authorizes banks/FIs to take possession or to take over management which is not there in the DRT Act. It is for this reason that NPA Act is treated as an additional remedy (section 37), which is not inconsistent with the DRT Act. 42. In the light of the above discussion, we now examine the doctrine of election. There are three elements of election, namely, existence of two or more remedies; inconsistencies between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply. According to American Jurisprudence, 2d, Vol. 25, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remains as to the object behind insertion of the three provisos to section 19(1) of DRT Act vide amending Act 30 of 2004. The DRT is a Tribunal, it is the creature of the statute, it has no inherent power which exists in the civil courts. Order XXIII Rule 1(3) CPC states inter alia that where the court is satisfied that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim then the civil court may, on such terms as it thinks fit, grant the plaintiff permission to withdraw the entire suit or such part of the claim with liberty to institute a fresh suit in respect thereof. Under Order XXIII Rule 1(1)(4)( b ), cases where a suit is withdrawn without the permission of the court, the plaintiff shall be precluded for instituting any fresh suit in respect of such subject-matter. Order XXIII Rule 2 states that any fresh suit instituted on permission granted shall not exclude limitation and the plaintiff should be bound by law of limitation as if the first suit had not been instituted. Order XXIII Rule 3 deals with compromise of suits. It states that where it is proved to the satisfaction of the court that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 49. Mr. N.C. Sahni and Mr. Pankaj Gupta, learned advocates appearing on behalf of the respective borrowers submitted that section 13(4) of the NPA Act empowers the secured creditor to take possession of the secured immovable assets of the borrower on expiry of sixty days and notice served under section 13(2) of that Act. It is pointed out that in many cases, the banks/FIs have taken actual physical possession whereas in other cases they have taken only a symbolic possession. Learned advocates submitted that in Kalyani Sales Co. Ltd. s case ( supra ) the High Court has rightly held that if physical possession is taken on expiry of sixty days, the remedy of application under section 17 of the NPA Act by the borrower would become illusory and meaningless as the borrower or the person in possession would be dispossessed even before adjudication of the objections by the Tribunal. Learned advocates further submitted that under section 13(8), the bank/FI is prevented from selling the secured assets, if the dues of the secured creditor with all costs, charges and expenses are tendered to the secured creditor at any time before the date fixed for sale. Learned advocates pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets. Section 13(4A) refers to the word possession simpliciter. There is no dichotomy in sub-section (4A) as pleaded on behalf of the borrowers. Under rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. It inter alia states that notice is given to the borrower who has failed to repay the amount informing him and the public that the bank/FI has taken possession of the property under section 13(4) read with rule 9 of the 2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and delivery of possession. Rule 9(6) states that on confi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charges and expenses referred to in section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of rule 8(4). Thus, rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under rule 9. Till the time of issuance of sale certificate, the authorised officer is like a court receiver under order XL Rule 1 CPC. The court receiver can take symbolic possession and in appropriate cases where the court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorized officer under rule 8 has greater powers than even a court receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected. Therefore, rule 8 provides that till issuance of the sale certificate under rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. It is well-settled that third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees as may be prescribed. Learned advocates submitted that under section 17(1) of NPA Act, as amended, a proviso is added which states that different fees may be prescribed for making an application by the borrower. It is further submitted that the word "prescribed" has been defined under section 2( s ) to mean prescribed by rules made under the NPA Act. It is urged that in the judgment of Mardia Chemicals Ltd. s case ( supra ), this Court held that the remedy under section 17 of NPA Act is not an appellate remedy. Clause (3) of the Order 2004 providing for fees for filing an appeal under the unamended provisions cannot, therefore, be made applicable to any application filed after 11-11-2004. Learned advocates submitted that NPA Act vide section 17(1) of NPA Act read with rule 7 of the 1993 rules under DRT Act cannot form the basis to claim ad valorem court fee in terms of rule 7 of the 1993 Rules, particularly after 11-11-2004 because, as stated above, this Court has held in Mardia Chemicals Ltd. s case ( supra ) that the remedy under section 17(1) of NPA Act is the original remedy and not an appellate remedy. It is further submitted that after 11-11-2004, fees could be l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter 11-11-2004, fees cannot be levied on the basis of the Order 2004 which was there prior to 11-11-2004. The contention of the borrowers is that since section 17(1) of NPA Act, as amended, provides for prescribing fees for an application under section 17(1) and since no rule has been framed under the NPA Act after 11-11-2004 fees cannot be levied under the Order 2004 dated 6-4-2004 which, according to the borrower, has come to an end after 11-11-2004 with the enactment of the amending Act 30 of 2004. 57. We do not find any merit in this last argument also. In the case of Madeva Upendra Sinai v. Union of India [1975] 3 SCC 765, one of the questions which arose for determination was whether the Central Government in the exercise of its power to remove difficulties under the Income-tax Act similar to section 40 of the NPA Act was competent to supply a deficiency in the Act. Answering the above question, this Court held as follows : "This raises two questions: (1) Is this a difficulty within the contemplation of clause (7) of the Regulation? (2) Is the Central Government in the exercise of its power under that clause competent to supply a deficiency or casus omissus of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect to the provisions of the Act and not a difficulty arising aliunde, or an extraneous difficulty. Further, the Central Government can exercise the power under the clause only to the extent it is necessary for applying or giving effect to the Act, etc., and no further. It may slightly tinker with the Act to round off angularities, and smoothen the joints or remove minor obscurities to make it workable, but it cannot change, disfigure or do violence to the basic structure and primary features of the Act. In no case, can it, under the guise of removing a difficulty, change the scheme and essential provisions of the Act. The above principles, particularly the distinction between a difficulty which falls within the purview of the Removal of Difficulty Clause and one which falls outside it, finds ample illustration in the 1949 Order and the impugned provision of the 1962 Order which came up for consideration in Straw Products case ( supra ). Excepting the reference to the correspond-ing provision of the 1922 Act, the language of the 1949 Order was the same as that of the unimpugned part of clause (3) of Order 2 of 1970 in the present case. The 1949 Order related to the rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct 30 of 2004 and till rules are prescribed in terms of section 2( s ) of the NPA Act. 59. Before concluding, it is necessary to analyse the following two judgments of this Court in the light of what is stated above. 60. In the case of AP State Financial Corpn. ( supra ) it has been held that section 29 of the State Financial Corporation Act, 1951 ("SFC Act") provides for the rights and remedies as also the procedure for enforcement of the rights. It is a complete code. It is open to the Corporation to act under section 29 to realise its dues from the defaulter concerned by following the procedure prescribed thereunder. The Corporation does not require the assistance of the court to enforce its rights while invoking the provisions of section 29. In the said judgment, it has been further held that section 31 has been enacted to take care of a situation where any industrial concern, in breach of any agreement, makes default in repayment of the loan or advance or the Corporation requires immediate repayment which the defaulter fails to make. This Court, therefore, held that section 31 provides for substantive relief in the nature of an application for attachment of property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. In the case of National Insurance Co. Ltd. ( supra ) this Court has held that on the language of section 167 of the Motor Vehicles Act, 1988 ("MV Act"), and going by the principles of election of remedies, a claimant (worker) opting to proceed under the Workmen s Compensation Act, 1923 ("1923 Act") cannot take recourse to the provisions to the MV Act except to the extent stated in section 167 of the MV Act. This judgment has no application to the facts of the present case. As held in the above judgment of National Insurance Co. s case ( supra ), section 167 of the MV Act statutorily provides for an option to the claimant stating that where death or bodily injury gives rise to a claim for compensation under the MV Act as also under the 1923 Act, the person entitled to compensation may, without prejudice to the provisions of Chapter X, can claim such compensation under either of the two Acts but not under both. Such a section is not there in the case before us and, therefore, the judgment in the case of National Insurance Co. Ltd. ( supra ) has no application. 63. Mr. Viswanathan, learned counsel appearing for M/s Transcore seeks time for filing an application under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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