TMI Blog2007 (12) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... rayed for in these Writ Petitions, but however, it is made clear that the petitioners are at liberty to pursue the other alternative remedies and also to pursue the suit said to be pending, and such proceedings to be decided on their own merits. Suffice to state that in the light of the respective stands taken by the parties, this Court is thoroughly satisfied that no relief as such can be granted in these Writ Petitions and these Writ Petitions are accordingly dismissed subject to the above observations. The non-payment of costs as per the directions of the draft also had been canvassed before this Court. It is needless to say that the parties are at liberty to pursue their remedies in accordance with law. - Writ Petition Nos.6846 and 17527 of 2007 - - - Dated:- 5-12-2007 - P.S. Narayana, J. K.V. Simhadri for the Petitioners . Ravi Kondaveeti, Smt. Ch. Vedavani, A.P. Mahesh and Y. Ramatheertha for the Respondent. JUDGMENT Heard Sri K.V. Simhadri and Smt. Vedavathi, the Counsel representing the writ petitioners in these Writ Petitions and also Sri Ravi Kondaveeti and Sri Y. Ramatheertha, Counsel representing the respondents. 2. W.P. No. 6846/2007 is file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property bearing Flat No. 102 (Northern side), 2 nd floor, Murthy Mansion and admeasuring 1650 sq. fts., together with proportionate undivided share in the land measuring 49.3sq.yards out of the total land measuring 691 sq.yds in premises bearing M.C.H. No.8-3-167/D19 in survey No. 137, Plot No. 19, Kalyan Nagar, Phase-I, Yousufguda, Hyderabad. Notice." 5. It is brought to the notice of this Court that there is a connected Writ Petition and hence it was directed to list W.P.No.6846/2007 along with W.P. No. 17527/2007. 6. In W.P. No. 17527/2007 rule nisi was issued on 20-8-2007 and while ordering notice in W.P.M.P.No.22430/2007 pending further orders, interim stay as prayed for had been granted. 7. M/s. Shil pa Homes, the writ petitioner in W.P. No. 17527/2007, is shown as 2 nd respondent in W.P.No.6846/2007. In view of the commonality of both facts and law involved in both these Writ Petitions, these Writ Petitions are being disposed of by this common order. 8. Sri Simhadri, the learned Counsel representing the writ petitioner in W.P.No.6846/2007 had taken this Court through the averments made in the affidavit filed in support of the Writ Petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 14 of the Act. 10. Sri Ravi Kondaveeti, the learned standing Counsel representing the Cooperative Bank had taken this Court through the respective pleadings of the parties and the material placed before the Court and further explained the scope and ambit of Section 13(2), Section 13(4) and Section 14 of the Act as well and placed strong reliance on the decision of the Division Bench of the Madras High Court and also the Division Bench of the Bombay High Court and would maintain that in the light of the views expressed by both the Division Benches of the Madras High Court and the Bombay High Court as well, the stand taken by the writ petitioners to be negatived and in the light of the same, the directions of D.R.A.T. would fall into insignificance. 11. Sri Ramatheertha, the learned Counsel representing R.3 and R.4 had tried to distinguish the decisions on which reliance had been placed by Sri Ravi Kondaveeti and also would emphasize that in the light of Rule 8 and also the clear provisions of Section 13(2) and Section 13(4) of the Act, it may have to be held that a Banking Institution cannot resort to Section 14 of the Act without following the procedure under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeping certain movable and immovable properties as equitable mortgage and that on their failure to repay the loan, the 1 st respondent Bank has filed Re.No.28/05-03 under Section 84 of the Multi State Cooperative Societies Act 39 of 2002 in the Court of the Central Registrar/Arbitrator for recovery of a sum of Rs.54,26,694/- and that after filing of the said case, the respondents 2 to 4 herein appear to have made certain payments. However, the Central Registrar/Arbitrator had passed an Award on 17-11-2003 directing the respondents therein to repay the outstanding loan amount of Rs.28,46,958/- with further interest from 1-10-2003 giving two months time for Redemption of Award from 17-11-2003 and in case of failure the amount shall be recovered by attaching and sale of their properties mentioned in the schedule "A " and "B " and other movable and immovable properties, which does not include the property of the petitioner. The petitioner further stated that on his insistence, he was informed by the respondents 2 to 4 that his flat is not covered under the mortgaged immovable properties to the bank and that they have also given him letters of correspondence addressed by the 2 n respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be permitted to pursue two remedies simultaneously in relation to the same cause of action. As there are questions of fact involved in the matter, it would be in the interest of the petitioner himself to pursue the remedy under the Securitisation Act and seek redressal. Till the said matter is finally settled, in view of the orders passed by the Debts Recovery Tribunal, the second respondent-Bank has to seek appropriate orders from the Debts Recovery Tribunal before taking further action pursuant to the impugned Award. " Further it is stated that challenging the notice issued by the 1 st respondent under Section 13(4) of the Act, the 2 nd respondent also filed S.A. No. 85/2004 on the file of Debts Recovery Tribunal and the same was allowed in part by the Tribunal by an order dt. 5-10-2005 setting aside the notice issued under Section 13(4) of the Act observing that the Bank has not complied with Rule 8(2) of the Act before issuing the said notice and holding that there is no need to issue notice under Section 13(2) afresh. Challenging the same, the 2 nd respondent filed an appeal before the Debts Recovery Appellate Tribunal, Chennai in RA(SARFAESI) No.42/2006 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal with regard to the cost alone, as I feel that the appellants are entitled to cost. In the result, the appeal is allowed in part no doubt the order with regard to "no costs " passed by the Debts Recovery Tribunal, Hyderabad is set aside and it is held that the appellants are entitled to costs. The appellants have filed an application for waiver of the deposit as required under Section 18 of the Act, in which this Tribunal by its order dt. 19-7-2006 directed the appellant to deposit a sum of Rs. 7 lakhs with the respondent Bank and the said sum was also deposited by the appellants and it is with the respondent Bank. As the appellants have questioned the validity of the measures taken under Section 13(4) of the Act, and the same was allowed by the Debts Recovery Tribunal, and it was not questioned by the respondent Bank, the appellants pray for refund of the said amount. Without prejudice to the rights and contentions of the appellants, the respondent Bank is hereby directed to keep the said amount o f Rs. 7 lakhs in an interest earning no lien account for a period of one year and if no action is taken by the respondent within the said time, the appellants are e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent in approaching the Court of Chief Metropolitan Magistrate, Hyderabad, under Section 14 of the Act without first taking the recourse to Section 13(4) of the Act is arbitrary and illegal since notice under Section 13(4) of the Act before proceeding Section 14 of the Act is mandatory. Further it is stated that the 1 st respondent should have seen that the earlier notice issued under Section 13(4), dt.25-8-2004 was set aside the Debts Recovery Tribunal, Hyderabad and the same was upheld by the Debts Recovery Appellate Tribunal, Chennai and it was also further observed by the Appellate Tribunal in its order dt.26-10-2006 that the 2 nd respondent herein is always at liberty to raise all the contentions, which they have already raised and they are also entitled to raise further contentions on the measures that would be taken by the respondent under Section 13(4) and they would not be precluded at all from raising all the contentions. This shows that there was a specific direction to the 1 st respondent to issue Section 13(4) Notice giving opportunity to the 2 nd respondent. The petitioner is neither borrower nor guarantor to the alleged marriage loan but he is bona fide pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest as on the date of payment and that the 2 nd respondent had already paid an amount ofRs.7 lakhs as against the total outstanding of Rs.37 lakhs as on the date of deposit of Rs. 7 lakhs and as such the 1 st respondent should have released one flat and also in view of earlier correspondence of 2 nd respondent with the 1 st respondent before the property is purchased. It is also stated by the petitioner that the respondents herein are connived with each other and are trying to deprive him of his valuable property and they are trying to secure his property by all means without any opportunity of putting for his grievance before the Debts Recovery Tribunal. It is also stated that the order passed by the Chief Metropolitan Magistrate under Section 14 of the Act cannot be called in question before any Court, more particularly before the Debts Recovery Tribunal under Section 17 of the Act and as such, the petitioner had no other alternative remedy except to approach this Court under Article 226 of the Constitution of India. It is further averred by the petitioner that for all the above reasons, he had made out a prima facie case and the balance of convenience is in his favo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and measuring 49.3 sq. yds., in the premises bearing MCH No.8-3-167/D-19 on Plot No. 19 situated at Kalyan Nagar, Yousufguda, Hyderabad from (1) Sri C. Murali Mohan Sastry, (2) Sri C. Tarakam and (3) M/s. Shilpa Homes, Erramanzil, Hyderabad by way of registered sale deed dated 28-10-2002 and also stated that the above Flat was mortgaged on 24-6-2002 in favour of the 1 st respondent Bank along with other properties as security for the loan taken by M/s. Shilpa Homes through registered mortgage deed document No. 1980/2002 dated 14-6-2002 registered in the Office of the Sub-Registrar, Banjara Hills, Hyderabad. Further it is also stated that during the subsistence of the above mortgage, the petitioner purchased the said flat on 28-10-2002 and that therefore, the petitioner is not entitled to question the action of the 1 st respondent Bank in issuing Possession Notice and proceeding under the Act for recovery of the loan amount. The petitioner knowing fully well that the above Flat was mortgaged in favour of the 1 st respondent Bank, purchased the said Flat. When the 1 st respondent Bank is going ahead for taking possession of the said Flat for selling the same, as the borrowers, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that arise after 13 (2) of SARFAESI Act afresh. " It is averred that the petitioner had withdrawn S.A . No. 119/2004 filed by him before the Debts Recovery Tribunal. Further it is stated that questioning the orders dated 5-10-2005 passed by the Debts Recovery Tribunal, in S.A.No.85/2004, the Vendors of the petitioner filed R.A. (SARFAESI) 42/2006 before the Debts Recovery Appellate Tribunal at Chennai and the Debts Recovery Appellate Tribunal by order dt.26- 10-2006, set aside the order of the Debts Recovery Tribunal passed in S.A.No.85/2004 with regard to costs alone and held that the appellants in the R.A., are entitled to costs and that the remaining part of the Order dated 5-10-2005 passed by the Debts Recovery Tribunal, Hyderabad in S.A.No.85/2004 was not disturbed by the Debts Recovery Appellate Tribunal. Thereafter, the 1 st respondent Bank authorities visited the secured assets on 27-12-2006 to take physical possession of the secured assets and that vendors of the petitioner prevented the Bank authorities to take the possession of the secured assets. Then the 1 st respondent Bank filed Crl.M.P.No.954/2007 before the Chief Metropolitan Magistrate, Hyderabad, in which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay the secured creditor, so much of the money as is sufficient to pay the secured debt. Therefore, Section 13(4) of the Act is not contemplating that notice is to be issued before taking possession of the property. However, the Advocate Commissioner issued notice to the vendors of the petitioner and the tenant of the petitioner on 26-3-2007 that on 7-4-2007 possession of the said properties would be taken by the Advocate Commissioner and the same would be handed over to the 1 st respondent Bank authorities. Rule 8(1) of the Rules framed under the Act reads as follows: "Where movable secured assets is sold, sale price of each lot shall be paid as per terms of the public notice or on the terms as may be settled between the parties, as the case may be and in the event of default of payment, the movable secured assets shall be liable to be ordered for sale again. " Para 2 and para 3 of the Appendix IV [Rule 8(1)] read as follows: "The borrower having failed to repay the amount, notice is hereby given to the borrower and the public in general that the undersigned has taken possession of the property described hereinbelow in exercise of powers conferred on him/her under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of the immovable property referred to in sub-rule (I) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods :-- (a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction; or (d) by private treaty. (6) the authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets, under sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include, - (a) the description of the immovable property to be sold, including the details of the encumbrances known to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules. (7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him. (8) On such deposit of money for discharge of the encumbrances, the authorised officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Encumbrance Certificate said to have obtained by the petitioner is dated 21-1-2005 and the date of purchase of the Flat by the petitioner is 26-10-2002 and that therefore, the contention of the petitioner that he bona fidely verified the marketable title of respondents 2 to 4 with regard to the above Flat is absolutely false. The other allegation of the petitioner that the 2 nd respondent had written a letter to ICICI Bank stating that they have sold the said Flat to the petitioner, that the Flat is not subject to any encumbrance, charge or liability and they have no objection for mortgaging the said Flat to the Bank by way of security for the loan obtained by him is not tenable and that the letter said to have been issued by the 2 nd respondent to ICICI Bank is not binding on the 1 st respondent Bank and that if the vendors of the petitioner misrepresented with regard to the legality of their title in respect of the above Flat, the petitioner has to take appropriate action against his vendors, but he cannot question the proceedings initiated by the 1 st respondent Bank under the Act. The against of the petitioner that suppressing the facts, the 1 st respondent Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the Act, the respondent Bank got issued notice under Section 13(2) of the Act for recovery of purported outstanding of Rs.2'5,69,897/- on 25-4-2003 and subsequently, the possession notice dated 25-8-2004 under Section 13(4) of the Act was also served on the petitioner. Aggrieved by the notice under Section 13(4), dt.25-8-2004, the petitioner had filed an application vide S.A.No. 85/2004 before the Debts Recovery Tribunal, Hyderabad, on the ground that the said account does not fall under the category of NPA so as to enable the respondent Bank to initiate the recovered proceedings contemplated under the Act. The said S.A.No. 85/2004 was partly allowed by the Debts Recovery Tribunal, Hyderabad on 5-10-2005 by setting aside the proceedings taken up by the respondent under Section 13(4) of the Act, but however, it was made clear that the demand notice issued under Section 13(2) holds good in law and that the respondent may take up proceedings that arise after 13(2) of the Act afresh. It is also stated that as against the order of the Debts Recovery Tribunal, Hyderabad in S.A.No.85/2006, the peti tioner had preferred an appeal to the appellate authority on the ground that the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are also entitled to raise further contentions on the measures that would be taken by the respondent under Section 13(4) of the Act and they would not be precluded at all from raising all the contentions and this shows that there is a specific direction to the respondent to issue notice under Section 13(4) of the Act giving an opportunity to the petitioner and that therefore, not following the same has resulted in violation of the petitioner valuable right of defence. The respondent Bank is obligated to pay the costs of the application as directed by the Appellate authority and that without adhering the orders/directions of the Appellate authority issuing notice under Section 14 of the Act is contrary to the direction of the Tribunal and liable to be set aside. Section 19 of the Act contemplates the right of the borrower to receive the compensation and costs where the rules and measures are not followed by the secured creditor in accordance with the provisions of the Act. In the instant case both the Tribunals held that the measures taken by the respondent Bank were not in accordance with the provisions of the Act, accordingly set aside the same by directing the respondent Bank to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-Section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and rules made thereunder. (3) If the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-Section (4) of Section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, the require restoration of the management of the business to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in sub-Section (4) of Section 13 taken by the secured creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-Section (4) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the loan, the petitioner executed a Mortgage Deed on 14-6-2002 in favour of the Bank mortgaging the semi-finished flats situated on the northern side of I Floor, II Floor and V Floor and the Flat situated on the southern side of the V Floor each admeasuring 1650 sq. ft., along with undivided share of land admeasuring 276.4 sq. yards out of total land admeasuring 698 sq. yards in 'Murthy Mansion' in the premises MCH No.8-3-167/D/19 in S. Nos. 52, 138 and 139 situated at Yousufguda, Hyderabad and also stated that at that particular point of time, Flat numbers were not assigned as they were in semi-finished stage. Further it is also stated that in the mortgage deed, the Floor numbers were counted as Stilt plus five upper floors as stated by the petitioner and that in the mortgage deed it was agreed that the mortgagee i.e., the respondent Bank would release one Flat on payment of 25% outstanding loan, including interest as on the date of payment and accordingly, on payment of certain amounts, out of the four Flats mortgaged, the Flat on the norther n side of I Floor and the Flat on Southern side of V Floor (two flats) were released on 15-4-2004. It is also further stated that that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required under Rule 8(2) of the said Act, but, however, the Debts Recovery Tribunal made it clear that "the Demand Notice issued under Section 13(2) holds good in law and that the respondent may take up proceedings that arise after 13 (2) of SARFAESI Act afresh. " Further it is stated that questioning the orders dated 5-10-2005 passed by the Debts Recovery Tribunal, in S.A.No.85/2004, the petitioner filed R.A. (SARFAESI) 42/2006 before the Debts Recovery Appellate Tribunal at Chennai and the Debts Recovery Appellate Tribunal by order dt: 26-10-2006, set aside the order of the Debts Recovery Tribunal passed in S.A.No.85/2004 with regard to costs alone and held that the appellants in R.A., are entitled to costs and that the remaining part of t he Order dated 5-10-2005 passed by the Debts Recovery Tribunal, Hyderabad in S.A.No.85/2004 was not disturbed by the Debts Recovery Appellate Tribunal. Thereafter, the respondent Bank authorities visited the secured assets on 27-12-2006 to take physical possession of the secured assets and that the petitioner prevented the Bank authorities to take the possession of the secured assets, then the respondent Bank filed Crl. M.P.No.954/2007 befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rguments relating to the maintainability of the Writ Petition. Hence, this question need not detain this Court any further. The principal questio3n which had been argued in elaboration is that whether an action can be initiated under Section 14 of the Act, without the same being preceded by a notice under Section 13(4) of the Act. Section 14 of the Act reads as hereunder: "Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of the secured asset: (I) 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 by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him... ( a ) possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st would receive sympathetical consideration. As a sequel of dismissal of the writ appeals, W.A.M.P.Nos.l473 to 1478 of 2007 filed by the appellants for interim relief are also dismissed. " Reliance also was placed on Greater Bombay Co-op. Bank Ltd. v. United Yarn Tex (P.) Ltd. 1 , Transcore v. Union o f India wherein it was observed at paras 55, 56, 57, 58 and 60 it was observed as hereunder:- "The word possession is a relative concept. It is not an absolute concept. The dichotomy between symbolic and physical possession does not find place in the Act. As stated above, there is a conceptual distinction between securities by which the creditor obtains ownership of or interest in the property mortgaged and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the satisfaction of the debt(charges). Basically, the NPA Act deals with the former type of securities under which the secured creditor, namely, the bank/FI obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/tribunals . Keeping the above conceptual aspect in mind, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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, nor in accordance with the provisions of the Act, then the DRT is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before confirmation of sale, the rights of the borrower to get the dispute adj udicated upon is defeated by the authorized officer taking possession. As stated above, the NPA Act provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8, undoubtedly, refers to sale of immovable secured asset. However, Rule 8(4) indicates that where possession is taken by the authorized officer before issuance of sale certificate under Rule 9, the authorized officer shall take steps for preservation and protection of secured assets till they are sold or otherwise disposed of. Under Section 13(8), if the dues of the secured creditor together with all costs, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntral 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") making the provision for levying of fees for filing of appeals. This Order 2004 was issued on 06-04-2004. It is further pointed out that on 08-04-2004, this Court delivered its judgment in the case of Mardia Chemicals (supra), Clause(3) of the Order 2004 provides that the fee for filing of an appeal to DRT under Section 17(1) of the NPA Act shall be mutalis mutandis as provided for filing of an application to DRT under Section 19 of the DRT Act read with Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993("1993 Rules"). Learned advocates urged that after the amending Act 30 of 2004 which came into force with effect from 11-11-2004 by which amendment was made to Section 17(1) of NPA Act, the Order 2004 dated 06-04-2004 issued by the Central Government has become redundant because the amending provision stipulates filing of an application by the borrower under Section 17(1) of NPA Act to the DRT challenging the action under Section 13(4) by filing an application along with payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parately charged to the borrower (applicant) for which different fees could be prescribed. The said proviso indicates that the tribunal under Section 17(1) exercises Original Jurisdiction and, therefore, as far as the fees are concerned, the terminology of original or appellate jurisdiction in the context of fees is irrelevant. Secondly, under the Order 2004 issued by the Central Government under Section 40 of the NPA Act, it is provided that the fee for filing an appeal to the DRT under Section 17(1) of NPA Act shall be mutates mutandis as provided for filing an application to the DRT under Rule 7 of the 1993 Rules. The word mutates mutandis indicates that a measure is adopted for assessing the fees required to be paid by the borrower when he applies by way of application to the DRT under Section 17(1) of NPA Act challenging the action taken under Section 13(4) of NPA Act by the secured creditor. Lastly, we do not find any merit in the argument advanced on behalf of the borrowers that since fees have not been prescribed by the rules after 11-11-2004, fees cannot be levied on the basis of the Order 2004 which was more prior to 11-11-2004. The contention of the borrowers is that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the notice under Section 13(2) of the Act can also be raised in the proceedings under Section 17(1) of the Act. It would be for the Debt Recovery Tribunal to decide in each case whether the action of the bank is in accordance with the provisions of the Act and is legally sustainable. " "The challenge to the Act was set at rest by the Supreme Court in Mardia Chemicals v. Union of India, 2004(4) S.C.C. 311:2004(2) D.R.T.C. 107(S.C.) The following paragraphs of the above judgment are relevant: In the background we have indicated above, we may consider as to what forums or remedies are available to the borrower to ventilate his grievance. The purpose of serving a notice upon the borrower under sub-section (2) of Sec. 13 of the Act is, that a reply may be submitted by the borrower explaining the reasons as to why measures may or may not be taken under subsection (4) of Sec. 13 in case of non-compliance with notice within 60 days. The creditor must apply its mind to the objections raised in reply to such notice and an internal mechanism must be particularly evolved to consider such objections raised in the reply to the notice. There may be some meaningful consideration of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons for not accepting the objections raised by the borrower in reply to the notice under Sec. 13(2) of the Act, more particularly for the reason that normally in the event of non-compliance with notice, the party giving notice approaches the Court to seek redressal but in the present case, in view of Sec. 13(1) of the Act the creditor is empowered to enforce the security himself without intervention of the Court. Therefore, it goes with logic and reason that he may be checked to communicate the reason for not accepting the objections, if raised and before he takes the measures like taking over possession of the secured assets, etc. This will also be in keeping with the concept of right to know and lender's liability of fairness to keep the borrower informed particularly of the developments immediately before taking measures under sub-section (4) of Sec. 13 of the Act. It will also cater to the cause of transparency and not secrecy and shall be conducive in building an atmosphere of confidence and healthy commercial practice. Such a duty, in the circumstances of the case and the provisions, is inherent under Sec. 13(2) of the Act. However, to a very limited extent jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in respect of any measure taken under sub-section(4) of Sec. 13 of the Act. Hence, the decisions on the point as to whether provision for an appeal is essential or not are not of any assistance in the facts of the present case. " The answer to the appellant's question is found in para 45 extracted above, which requires the creditor to apply its mind to the objections raised in the reply notice under Sec. 13(2) of the Act. There must be some meaningful consideration of the objections and not a ritual rejection, to be followed up by the measures under sub-section(4) of Sec. 13. If the Supreme Court had found on a reading of Sec. 13 (2) and Sec. 13 (4) that before proceeding under Sec. 13(4) of the Act, a notice to be issued, the words "rather than to ritually reject them and proceed to take drastic measures... "would not have been made. Therefore, it is clear that the intention of the creditor to proceed against the assets unless a satisfactory objection is received from the borrower, is expressed only once and that is by the notice under Sec. 13(2) of the Act. In fact, it is seen from a reading of para 45 above, that banks and financial institutions should apprise the borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent context, while dealing with the constitutional validity of the Terrorist and Disruptive Activities (TADA) Act, the Supreme Court observed that this kind of invocation of the provisions of TADA Act "in cases, the facts of which do not warrant, is nothing but sheer misuse and abuse of the Act by the police. Unless the public prosecutors rise to the occasion and discharged their onerous responsibility keeping in mind that they are prosecutors on behalf of the public, it cannot be said that the provisions of the TADA Act are enforced effectively in consonance with the legislative intent. "Paraphrasing the same in the present context, we may say, therefore, "if invocations of the provisions of the Act in cases where it is not warranted or where it is unjustified are recklessly resorted to, it would amount to flagrant abuse of the Act". Perhaps, it is this fear of possible abuse by the lenders that prevailed upon the learned single Judge to read into Sec. 13(4), the requirement of a notice. " Further, reliance was placed on Trade Well, A Proprietorship Firm Mumbai v. Indian Bank Another 4 wherein it was observed that "Sub-section (3) of S.I 4 is preceded by sub-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the application of Sections 13 and 14 thereof to the case on hand. CMM/DM acting u/S.14 of the Act is not required to give notice either to the borrower or to the 3 rd party. He has to only verify from the bank or financial institution whether notice u/S. 13 (2) of the Act is given or not and whether the* secured assets fall within his jurisdiction. There is no adjudication of any kind at that stage it is only if the above conditions are not fulfilled that the CMM/DM can refuse to pass an order u/S.14 of the Act by recording that the above conditions are not fulfilled. If these two conditions are fulfilled, he cannot refuse to pass an order u/S.14. Remedy provided u/S.17 of the Act is available to the borrower as well as the third party. Remedy provided u/S. 17 is an e fficacious alternative remedy available to the third party as well as to the borrower where all grievances can be raised." 19. Hence, in the light of the views expressed by the learned Division Bench of the Madras High Court and the learned Division Bench of the Bombay High Court, referred to supra, this Court is of the considered opinion that the stand taken by the writ petitioners in both these Writ Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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