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TMI Blog2015 (1) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners availed of loan facility from respondent No.2-Bank and as they failed to repay the loan amount, they were declared as defaulters. As the petitioners defaulted in repayment of the loan amount, the Bank decided to proceed against them under the Act. The Bank issued a notice under Section 13(2) of the Act and called upon the petitioners to make good the payment failing which the Bank would proceed to take over the possession of the secured assets under Section 13(4) of the Act. It appears from record that the petitioners being aggrieved by the measures taken by the Bank under the Act preferred an application under Section 17 of the Act in the form of an appeal. The appeal is still pending before the Debts Recovery Tribunal-2 at Ahmedabad. Record reveals that the Debts Recovery Tribunal, Ahmedabad refused to grant any interim relief in favour of the petitioners vide order dated October 10, 2011. Against the said order passed by the Debts Recovery Tribunal-2, Ahmedabad, refusing to grant any relief, the petitioners have preferred an appeal being No.65 of 2012 before the Debts Recovery Tribunal, Mumbai under Section 18 of the Act. The appeal is still pending before the Debts Rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a Chief Metropolitan Magistrate, as the case may be, it causes lot of hardship. 7.2 The learned advocate further submitted that in the Act there is a provision for appeal under Section 17 of the Act, if any person (including a borrower) is aggrieved by any of the measures referred to in sub-section (4) of Section 13 of the Act, taken by the Secured Creditor. However, against the order passed under Section 14 of the Act, no appeal has been provided. He also submitted that the right to appeal is recognised in the Act for other provisions, but when harsh powers are exercised under the provisions of Section 14 of the Act, wherein a person is being deprived of his property, the legislature has thought fit not to provide for any appeal. 8. To put it briefly, the sum and substance of the contentions as raised by the learned advocate for the petitioners, are two fold : (i) Section 14 of the Act confers unfettered and unbridled powers to the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, and when the legislature has thought fit to confer such powers, then absence of an appeal against such an order would render the provision ultra vires, and (ii) As no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stage the borrower is given a notice that if he fails to pay the debt within the time prescribed, the secured creditor may enforce for recovery of its debts by selling the secured asset. At that stage, the borrower has a right to make a representation or raise any objection under sub-section (3A) to Sec.13 and the secured creditor in such case is bound to consider the representation or objection, but if on consideration the secured creditor comes to a conclusion that such representation or objection is not acceptable or tenable, such decision is required to be communicated to the borrower. It is only after following the aforesaid provisions, the secured creditor may take recourse to sub-section (4) to Sec.13 for taking one or other measures as mentioned therein, including measures to take possession of the secured asset of the borrower and right to transfer by way of lease, assignment or sale for releasing the secured asset. Thus, it will be evident that before taking possession the secured creditor is required to give notice and after taking into consideration the representation and objections, the secured creditor can take direct possession of the secured assets or may take any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in clear terms that if any action of the secured creditor is not in accordance with the Act or Rules, then one can challenge such action or measures by filing an appeal under Section 17 of the Act, but such illegal action, if any, will not render Section 14 of the Act bad in law. 11. When we confronted the learned advocate of the petitioners with this particular judgment of the Division Bench, the learned advocate submitted that he is conscious about the judgment delivered by the Division Bench, but according to the learned advocate, the same can be termed as per incurium because the Division Bench did not consider the validity of Section 14 of the Act from the point of view that no appeal has been provided against an order passed under Section 14 of the Act. According to him, the right to property is a constitutional right and also a human right and no one can be deprived of his or her property arbitrarily. According to him, Section 14 of the Act can be termed as a very harsh provision and there should have been an appellate authority to examine the legality and validity of any orders passed under Section 14 of the Act. 12. We could have concluded at this very stage holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any court or before any authority." 15.2 On a plain reading it is apparent that the said provision is a procedural provision whereunder the Chief Metropolitan Magistrate or the District Magistrate, (the Authority) as the case may be, shall, on a request being made to him - (a) take possession of such asset and documents relating to the assets; AND (b) forward such assets and documents to the secured creditor. Under sub-section (2) of Section 14 of the Securitisation Act the authority is empowered to take such steps and use such force as may be necessary for taking possession of the secured assets and the documents relatable thereto. Under sub-section (3) of Section 14 of the Securitisation Act, such act of the authority is protected and the action shall not be questioned in any Court or before any authority. Thus, it is apparent that the role envisaged by the legislature in so far as the Authority is concerned, is a ministerial role in the form of rendering assistance and exercising powers by virtue of the authority vested in the District Magistrate or the Chi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Appellate Tribunal, while simultaneously Civil Court and any other authority are prohibited from dealing with the subject matter which can be exclusively determined by the Tribunal. 15.5 Hence, the Authority who is called upon to act under Section 14 of the Securitisation Act can only assist, nay, is bound to assist the secured creditor in taking possession of the secured asset. Any dispute between the parties regarding the secured asset raised before the Authority cannot be gone into by the Authority. 15.6 In this connection, we refer to section 13 of the Securitisation Act which reads as follows : "13. Enforcement of security interest.- (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act. (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 class ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law. 15.8 The rights given to the borrower under the Securitisation Act are summarised by the Hon'ble Supreme Court in the case of Mardia Chemicals Ltd. etc. v. Union of India and others, reported in AIR 2004 SC 2371 at paragraphs 80 and 81. We quote the same as follows : "80. Under the Act in consideration, we find that before taking action a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debt Recovery Tribunal. The above noted provisions are for the purposes of giving some reasonable protection to the borrower. Viewing the matter in the above perspective, we find what emerges from different provisions of the Act, is as follows:- 1. Under sub-section (2) of Section 13 it is incumbent upon the secured creditor to serve 60 days notice before proceeding to take any of the measures as provided under sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to in sub-section (4) of section 13, taken by the secured creditor or his authorised officer, he may make an application to the Debts Recovery Tribunal within 45 days from the date on which such measures had been taken. The Debts Recovery Tribunal/the appellate forum is also given power to restore possession. Section 17(1) to (4) of the Securitisation Act are quoted below: "17. Right to appeal.- (1) Any person (including borrower), aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor or his authorised officer under this Chapter, (may make an application along with such fee, as may be prescribed) to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken: (Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.) (Explanation.-For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the measures taken by the secured creditor under section 13(4) of the Securitisation Act invalid and consequential restoration of possession to the person from whom the possession was taken. In the absence of any adjudicatory power vested in the Magistrate under section 14, the above authority cannot exercise statutory powers vested in the Tribunal. From orders of the Tribunal a further appeal will lie to Appellate Tribunal under section 18 of the Securitisation Act. Under section 34 of the Securitisation Act, jurisdiction of Civil Courts to entertain any suit or proceeding is barred. Therefore, aggrieved person has to approach the Tribunal or Appellate Tribunal, as the case may be, under sections 17 and 18 and if possession is taken under section 14, other authorities are prohibited from dealing with the subject matter which can be exclusively determined by the Tribunal. Hence, the authority who is called upon to act under section 14 of the Securitisation Act can only assist the secured creditor in taking possession of the secured assets. The disputes raised between the parties before the authority cannot be adjudicated by it. It is for the borrower to move for stay of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 adjudicated upon is defeated by the authorised officer taking possession. As stated above, the NPA Act provides for recovery of possession by non-adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor in taking possession of the secured assets as provided under Section 13(4) of the Act. After 60 days' notice as prescribed under Section 13(2), secured creditor can approach the Magistrate for taking possession of the land. Reading Section 13(4) and Section 14 of the Act in conjunction with each other makes it clear that the source of power to take possession of the secured assets of the borrower can be traced in Section 13(4) of the Act and not under Section 14 of the Act, which has been indicated as an aid for execution of the decision taken by the secured creditor to take possession of the secured assets or documents. In other words, the substantive provision entitling the secured creditor to take possession of the secured assets is contained in Section 13(4) of the Act and Section 14 of the Act merely contains a provision to facilitate the secured creditor for taking over possession without any impediment. It is very clear that if a person feels aggrieved by the action of the secured creditor to take possession of the secured assets, then he can file an application under Section 17(1) of the Act before the Tribunal and the Tribunal can after examining facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued under Section 13(2) of the Act or not. Taken into consideration the limited role of the authority under Section 14 of the Act and also taking into consideration the fact that the appeal under Section 17 of the Act has been provided for redressal of grievance insofar as steps which are taken by secured creditor under Section 13(4) of the Act is concerned, the legislation in its wisdom may have thought fit not to provide for an appeal against an order passed by the authority concerned under Section 14 of the Act. The word "Appeal" has not been defined anywhere. An appeal in legal parlance is held to mean the renewal of a cause from an inferior or subordinate to a superior tribunal or forum in order to test and scrutinise the correctness of the impugned decision. It amounts in essence and pith to a complaint to a higher forum that the decision of the subordinate tribunal is erroneous and, therefore, liable to be rectified or set right. The right of appeal is a creature of the statute. In no one it adheres as a right unless it is positively created by a legislative device. Be it the parent legislation or subordinate legislation. The right of appeal is a statutory right and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch an order passed by the District Magistrate in exercise of powers under Section 9(A) of the Act. Under Section 9(A) powers have been conferred on the District Magistrate for revision of rent of commercial buildings let out by public religious institutions. Repelling this contention, the Supreme Court held in paragraphs 3 and 4 as under : "3. The fact that a right of appeal is not available against the order passed under Section 9-A of the Act does not render the said provision unconstitutional and void as being violative of Articles 14 and 19 of the Constitution on the ground of arbitrariness and reasonableness. Provision of a corrective machinery by way of appeal or revision to a superior authority to rectify an adverse order passed by an authority or body is only one of the several ways in which the power could be checked or controlled and its absence will be one of the factors to be considered along with others before coming to the conclusion that the power so conferred is unreasonable or arbitrary. The factors which have a bearing are : the status of the person on whom the power is conferred, the nature of the power, i.e., whether the exercise of the power depends upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Act which does not provide for an appeal from some of the decisions of the Town Planning Officer taken under Section 32 of the Act, while it has provided appeal to the Board of Appeal against some other decisions taken under the very same section was discriminatory. There is no rule that every decision of every officer under a statute should be made appealable and it is not so made appealable the statute should be struck down. It may be salutary if an appeal is provided against decisions on questions which are of great importance either to private parties or to the members of the general public, but ordinarily on such matters the legislature is the best judge. Unless the court finds that the absence of an appeal is likely to make the whole procedure oppressive and arbitrary, the court does not condemn it as unconstitutional. .. .. .." 15.17 In Chinta Lingam and others v. The Government of India and others, reported in AIR 1971 SC 474, a Five Judge Constitution Bench of the Supreme Court was dealing with a question as regards the powers of District Collector and the Deputy Commissioner of Civil Supplies under the Essential Commodities Act, 1955 so far as Control Orders issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or the Deputy Commissioner of Civil Sup-plies in the first instance and the permit has been refused or wrongly withheld by these officers. In these circumstances the absence of a provision for appeal or revision can be of no consequence. At any rate it has been pointed out in more than one decision of this Court that when the, power has to be exercised by one of the highest officers the fact that no appeal has been provided for is a matter of no moment; (See K. L. Gupta v. The Bombay Municipal Corporation & Ors., 1968-1 SCR 274 at p.297 = (AIR 1968 SC 303 at p.316). It may also be remembered that emphasis was laid in Pannalal Binjraj v. Union of India ( 2 ) on the power being vested not in any minor official but in top-ranking authority. It was said that though: the power was discretionary but it was not necessarily discriminatory and abuse of power could not be easily assumed. There was moreover a presumption that public officials would discharge their duties honestly and in accordance with rules of law." (emphasis supplied) 15.18 In yet another Five Judge Constitution Bench decision of the Supreme Court in the case of K.L. Gupte and others v. The Municipal Corporation of Grea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. 13 prescribes that the local authority should make an inquiry before granting or refusing a commencement certificate. The Authority must therefore look into all material available to it including the tentative plans and the final development plan and then make up its mind as to whether a commencement certificate should be granted or not. If the provisions of the Act are borne in mind and the rules framed thereunder complied with, as appears to have been done in these cases, there was little or no scope for the local authority acting arbitrarily under s. 13 of the Act." (emphasis supplied) 16. The principles discernible from the above referred authoritative pronouncements are thus very clear. The fact that a right of an appeal is not available against an order by itself will not render a particular provision unconditional and void as being violative of Articles 14 and 19 of the Constitution on the ground of arbitrariness and reasonableness. As held by the Supreme Court the factors which have a bearing are : (a) The status of the person on whom the power is conferred; (b) The nature of the power which has been conferred; (c) Whether the exercise of power depends upon subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Companies, Corporate Banks or Financial Institutions, Foreign Banks, some of them may not be authorities within the meaning of Article 12 of the Constitution of India, against whom a writ-petition could be maintainable. Lastly, it was submitted that a borrower is virtually left with no remedy and as access to the Court is prohibited and no proper adjudicatory mechanism is provided, the Act is unconstitutional and cannot survive. The Supreme Court negatived all the contentions referred to above and held in paragraph 74 as under : "74. A reference has also been made for similar observations to the cases reported in 1980 (4) SCC p.507 at 513-514, Srinivas Enterprises v. Union of India and 1967 (1) SCR p.15 at p.36, Jalan Trading V. Union of India. While referring to the observations made in a case reported in 1962 (3) SCR p.786 at p.829-30, the Collector of Customs, Madras V. Nathella Samapathu Chetty, it is submitted that the intent of the Parliament shall not be defeated merely for the reason that it may operate a bit harshly on a small section of public where it may be necessary to make such provisions of achieving the desired objectives to ensure that the nefarious activities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption to that effect has to be drawn. If a balance is sought to be struck by reason of the impugned legislation, it would not be permissible for this Court to declare it ultra vires only because it may cause some hardship to the petitioners. A mere hardship cannot be a ground for striking down a valid legislation unless it is held to be suffering from the vice of discrimination or unreasonableness. A valid piece of legislation, thus, can be struck down only if it is found to be ultra vires Article 14 of the Constitution of India and not otherwise. We do not think that in this case, Article 14 of the Constitution is attracted." 20. Our final conclusions are summarised thus : (i) Section 14 of the Act is a valid piece of legislation and is declared intra vires. (ii) The District Magistrate or Chief Metropolitan Magistrate, as the case may be, is bound to assist the secured creditor in taking possession of the secured assets and is not empowered to decide the question of legality and propriety of any of the actions taken by the secured creditor under Section 13(4) of the Act. (iii) Though Section 14 of the Act provides that no act of the Chief Metropolitan Magistrate or Distric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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