TMI Blog2015 (1) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... the purpose of taking over of the possession of the secured assets - petitioners have challenged the legality and validity of Section 14 of the Act on the ground that the same is violative of Articles 14, 19 and 300-A of the Constitution of India. Held that:- Fact that a right of appeal is not available against the order passed under Section 14 of the Act does not render the said provision unconstitutional and void as being violative of Articles 14 and 19 of the Constitution of India on the ground of arbitrariness and reasonableness. - Section 14 of the Act is a valid piece of legislation and is declared intra vires - 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. Though Section 14 of the Act provides that no act of the Chief Metropolitan Magistrate or District Magistrate done in pursuance of Section 14 shall be called in question in any Court or before any authority, the right of judicial review under Articles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overy 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 Recovery Tribunal, Mumbai. It appears that in the meantime, the Bank preferred an application under Section 14 of the Act before the District Magistrate, Surat, requesting to provide for police protection for the purpose of taking over of the actual possession of the secured assets. The District Magistrate, Surat vide order dated January 30, 2012 directed the Police Inspector of the concerned Police Station to provide for necessary assistance for the purpose of taking over of the possession of the secured assets. 3. The petitioners as original borrowers-defaulters are aggrieved by the order passed by the District Magistrate, Surat in exercise of powers under Section 14 of the Act directing that necessary police protection and force be provided to the authorities of the Bank for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 appeal has been provided under the Act against the order passed under Section 14 of the Act, it causes immense hardship to the person who is being deprived of his property by taking over the possession of the same. 9. It would not be out of place to state at this stage that the constitutional validity of Section 14 of the Act was a subject matter of challenge before this Court in the case of Rameshwaram Cotton Industries (Gujarat) Pvt. Ltd. v. District Magistrate and others in Letters Patent Appeal No.165 of 2010 in Special Civil Application No.712 of 2010, decided on February 04, 2010. The Division Bench while upholding the constitutional validity of Section 14 of the Act dismissed the appeal observing as under : 5. Though banking industry in Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 action as stipulated under sub-section (4) to Sec.13. 6. In the case of Bharatbhai Ramniklal Sata, Prop. of Satyajeet Trading Co. Vs. Collector District Magistrate and another (Letters Patent Appeal No.2172 of 2009) this Court by its unreported judgment dated 03.02.2010 held that a secured creditor cannot take possession of the secured asset except in accordance with the prescribed procedure. For taking such possession, procedure is prescribed u/Sec.14, in accordance with which the secured creditor has to request the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, to assist the secured creditor in taking possession of the secured asset. In such case, the Chief Metropolitan Magistrate or the District Magistrate, as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 that as the Division Bench of this Court has already upheld the validity of Section 14 of the Act, no further adjudication would be necessary relying on the judgment rendered in the case of Rameshvaram (supra). However, we are of the view that there are some important issues arising in this petition which we would like to look into and express our opinion on the same. 13. We have, therefore, decided look into the issues as regards the constitutional validity of Section 14 of the Act independently and more particularly, in context of the contention that no appeal has been provided against such an order passed under Section 14 of the Act. 14. It is well settled position of law that a statute can be invalidated or held unconstitutional - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 Chief Metropolitan Magistrate including use of force as may be necessary. The said Authority, namely, the Chief Metropolitan Magistrate or the District Magistrate is not vested with any adjudicatory powers. There is no other provision under the Securitisation Act in exercise of which the said Authority, who is approached by a secured creditor, can undertake adjudication of any dispute between the secured creditor and the debtor or the person whose property is the secured asset of which possession is to be taken. If such adjudicatory powers were to be vested in the Authority, the Securitisation Act would have made a specific provision in this regard. 15.3 Section 13(4) of the Securitisation Act provides for various measu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive, 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 the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debt Recovery Tribunal under Section 17 of the Act, at that stage. 2. As already discussed earlier, on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debt Recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of section 17.) (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 the 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 cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 sale or confirmation of sale of the property put in possession of the secured creditor. Possession handed over may be symbolic or physical. If physical possession is handed over, the creditor is entitled to put back the borrower in possession if borrower succeeds before the Tribunal. Before the secured creditor approaching the Magistrate under section 14, notice under section 13(2) must be issued. The Hon'ble Supreme Court has in M/s.Transcore v. Union of India (AIR 2007 SC 712) held as follows : 56. Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, 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-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 authorised officer before issuance of sale certificate under Rule 9, the authorised 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, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 circumstances of the case and evidence adduced by the parties declare that the action taken by the secured creditor is not in consonance with Section 13(4) of the Act. The Tribunal can also direct the secured creditor to restore the possession of the secured assets of the borrower. At this stage, we may only state that it does not make any difference as to whether possession has been taken over by the secured creditor itself or with the aid of Section 14 of the Act. The object of Section 14 of the Act is to be invoked only in case the secured creditor faces obstruction and not as a matter of course, by-passing the provision of Section 13(4) of the Act. It is for the secured creditor to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perior 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 if it is not so provided in the statute then a litigant cannot claim that right or plead that on that ground alone the provision is unconstitutional. We shall deal with this issue hereinafter in detail as to whether absence of appeal will render the provision of Section 14 of the Act unconditional or not. We may only say that the legislature designedly did not provide an appeal against an order passed under Section 14 of the Act because under Section 14 of the Act the authority does not adjudicate any of the rights of the respective parties or determines any lis between the parties. What can be appealed before the high forum is a decision which would decide some rights betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 subjective satisfaction of the authority or body or is to be exercised objectively by reference to some existing facts or tests; is it a quasi-judicial power requiring observance of the principles of natural justice and making of a speaking order etc. in which event the order would be subject to judicial review under Article 226 of the Constitution on the grounds of perversity, extraneous and irrelevant considerations, mala fides and other infirmities (See : Organo Chemical Industries v. Union of India; Babubhai Co. v. State of Gujarat and Workmen v. Meenakshi Mills Ltd.). 4. The power under Section 9-A is conferred on the District Magistrate or an officer autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udge. 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 under Section 3(2)(d) of the Essential Commodities Act, 1955 imposing restrictions on movement of rice and paddy were concerned. In the case before the Supreme Court, the contention was that uncanalised and unbridled powers had been invested in District Collector or Deputy Commissioner of Civil Supplies without any provision of appeal or revision leading to an inference that the power is arbitrary. Repelling this contention, the Supreme Court held in paragraph 6 as under : 6. .. .. .. It is common ground that the officers authorised by the State Government are the District Collector and the Deputy Commissioner of Civil Supplies. These officers cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Greater Bombay and others, reported in AIR 1968 SC 303(1), the Supreme Court dealt with an issue that Section 19 of the Bombay Town Planning Act, 1955 gave an unbridled and uncanalised powers to the legal authority to refuse a commencement certificate arbitrarily and the fact that no appeal from the decision under Section 13 was provided. The Supreme Court dealt with this issue by holding in paragraph 34 as under : 34. The second argument that s. 13 of the Act gave an uncontrolled and uncanalised power to the local authority to refuse a commencement certificate arbitrarily cannot also be accepted. As already noted, the development of an area like Gre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred 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 subjective satisfaction of the authority or body or is to be exercised objectively by reference to some existing facts or tests; (d) is the power quasi-judicial requiring observance of the principles of natural justice and passing of a speaking order, in which event, the order would be subject to judicial review under Article 226 of the Constitution. The Supreme Court in clear terms has observed 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. 17. Thus, in view of the authoritative pronouncements of the Supreme Court referred to above, the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 of smuggling etc. had to be necessarily curbed. In Fatehchand Himmatlal (supra) where debts of the agriculturists were wiped of, this Court observed: Every cause claims its martyr and if the law, necessitated by practical considerations, makes generalizations which hurt a few, it cannot be helped by the Court. Otherwise, the enforcement of the Debt Relief Act will turn into an enquiry into scrupulous and unscrupulous creditors, frustrating through endless litigation, the instant relief to the indebted which is the promise of the legislature. [See p.689 para 44] Yet in another decision referred to reported in 1961 (3) SCR p.135 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 District Magistrate done in pursuance of Section 14 shall be called in question in any Court or before any authority, the right of judicial review under Articles 226 and 227 of the Constitution of India cannot be taken away, but that power can be exercised only in cases where the concerned Magistrate or the Commissioner, as the case may be, exceeds his power or refuses to exercise his jurisdiction vested in him under the law. (iv) Absence of an appeal does not necessarily render the legislation unreasonable as only because no appeal is provided under the Act against the order passed under Section 14 of the Act will not render ..... X X X X Extracts X X X X X X X X Extracts X X X X
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