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Sri C. Malla Reddy Versus The Authorized Officer, IDBI Bank Limited, Hyderabad and others

Taking possession of the residential house - taking over of possession of the secured interest to the secured creditor - Held that:- At the stage of making over the possession of the secured interest to the secured creditor, any person, whose interests are adversely impacted in the process of taking possession by the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, acting on its own or acting though a Commissioner appointed for the said purpose, is entitled to file h .....

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ate-Commissioner in her affidavit filed before us, clearly brings out, in paragraph 3, that she has identified the scheduled property and executed the warrant and further went on to assert that the petitioner, his servants, his wife and several others stated that the house bearing D.No. 1-5-230 situated in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal, Ranga Reddy District belongs to the petitioner herein. We have to go by her statement of fact that the said house bearing D.No. 1-5-230 is .....

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th.

Even otherwise, there is no credible material that was placed on record of this Court to show that the house bearing D.No. 1-5- 230 is actually lying in Survey No. 51/AA, but is not lying in Survey No. 51/EE of Alwal Village. The fact that the house property has been assessed to property tax by the local municipality/corporation, does not necessarily reflect that the said house property is lying in Survey No. 51/AA, but not in Survey No. 51/EE. As was already noticed supra, the re .....

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vey No. 51/AA, but not in Survey No. 51/EE. Even otherwise, that being a controversy of fact, which can only be determined upon collection of evidence, both oral and documentary, in exercise of jurisdiction under Article 226 of the Constitution, seldom such collection of evidence is resorted to, in that, this Court is not forbidden from collecting any such evidence, but was not indulged in routinely. - WRIT PETITION No. 41006 OF 2015 - Dated:- 16-2-2016 - SRI JUSTICE NOOTY RAMAMOHANA RAO AND DR. .....

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illegal and unconstitutional and hence, to direct Respondents 1 and 2 together with the 3rd respondent Advocate-Commissioner appointed in Crl.M.P.No. 654 of 2015 on the file of the Chief Metropolitan Magistrate, Ranga Reddy District at L.B.Nagar to forthwith restore the possession of the house property described supra to the petitioner and also to quash the proceedings initiated by Respondents 1 and 2 under the Securitization and Reconstruction of Financial Assets and Enforcement of Security In .....

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from the Industrial Development Bank of India, whose Deputy General Manager is impleaded as the 2nd respondent herein. The financial benefits availed comprised of two components; 1) a term loan limited to ₹ 4 crores; and 2) a cash credit loan limited to ₹ 3.70 crores in the year 2009. The writ petitioner, in paragraph 6 of the affidavit filed in support of this Writ Petition, would describe himself as a nominal participant in the business of the said company and since the bank has in .....

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District. Annexure-I to the deed of mortgage dealt with the security created by the petitioner herein and it reads as under: It is not in dispute that the credit facilities availed by the 4th respondent company have remained un-liquidated and consequently, the bank has declared the debt as a non-performing asset . The Parliament, with a view to regulate securitization and reconstruction of financial assets and enforcement of security interest and for matters connected therewith and incidental t .....

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he instant case answers this description as per the definition contained in Section 2(c) of the Act. Section 2(f) defined the expression borrower in the following terms: borrower means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and include a person who becomes borrower of a securitization company or r .....

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for the land comprising of Ac.1.03 guntas lying in Survey No. 51/EE of Alwal Village. Hence, he is liable to be treated as a borrower of the bank. The expression debt has been defined in Section 2(ha) to carry the same meaning assigned to it in clause (g) of Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. In that enactment, the said expression has been defined as under: debt means any liability (inclusive of interest) which is claimed as due from any person .....

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cation. From the above definition, there is hardly any doubt that there exists a debt between the bank and the principal borrower, the 4th respondent company. The expression default has been defined in Section 2(j) as meaning - non-payment of any principal debt or interest thereon or any other amount payable by a borrower to any secured creditor consequent upon which the account of such borrower is classified as non-performing asset in the books of account of the secured creditor. Therefore, the .....

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vable property; or iv) any right or interest in the security, whether full or part underlying such debt or receivables; or v) any beneficial interest in property, whether movable or immovable, or in such debt, receivables, whether such interest is existing, future, accruing, conditional or contingent; or vi) any financial assistance. Thus, any debt or receivables secured by mortgage of or charge on immovable property amounts to a financial asset . The expression non-performing asset is defined i .....

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case, in accordance with the directions or guidelines relating to assets classifications issued by the Reserve Bank. While the expression property is defined in Section 2(t) as under: property means- (i) immovable property; (ii) movable property; (iii) any debt or any right to receive payment of money, whether secured or unsecured; (iv) receivables, whether existing or future; (v) intangible assets, being know-how, patent, copyright, trade mark, licence, franchise or any other business or comme .....

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cement of the security interest of the secured creditor. That is the reason why a special provision is created in sub-section (1) of Section 13 of the SARFAESI Act by making it clear that the security interest created in favour of any secured creditor can be got enforced without the intervention of the Court. The intention of the Parliament is so very clear that it wanted to address the malady of the defaults committed by the borrowers in repayment of the debt due by them, resulting in getting i .....

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d thus fails to do so, sub-section (4) empowered the secured creditor to take recourse to one or the other of the measures provided there under to recover his secured debt. Clause (a) thereof specified that the secured creditor may take possession of the secured asset of the borrower including right to transfer by way of lease, assignment or sale for realizing the secured asset. Thus, a secured creditor has been vested with a special power to take possession of the secured asset of the borrower .....

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d for. Subsection (1) of Section 14 empowers that the secured creditor, who seeks to take possession of any secured asset, 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 may be situated, to take possession thereof. Whenever any such application is received by the Chief Metropolitan Magistrate or the District Magistrate, he is required .....

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ecured asset in question was lying within the jurisdiction of the said Court. Hence, the bank appears to have approached the Chief Metropolitan Magistrate, Ranga Reddy District at L.B. Nagar and accordingly, the learned Chief Metropolitan Magistrate entertained Crl.M.P.No. 654 of 2015 and appointed the 3rd respondent Advocate as Commissioner and entrusted the said Commissioner with the task of executing the warrant for taking possession of the scheduled property. The schedule of property, which .....

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by the petitioner on 18.02.2009 in favour of the bank excepting to the following extent: together with all structures thereon and all the things attached to the earth or permanently fastened to anything attached to the earth The Chief Metropolitan Magistrate, in our considered opinion, has not committed any error in exercise of power and jurisdiction in rendering the necessary assistance under sub-section (1) of Section 14 to the secured creditor, namely the bank, for taking possession of the m .....

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he Commissioner, in fact, discharges the functions of the Court itself, but however, he does it on its behalf as the Court itself need not travel to the place where the secured asset was lying. For this purpose, a warrant is liable to be drawn and issued, so that the Commissioner can demonstrate his lawful authority to take possession of the secured asset. By holding such a lawful authority, the Commissioner can also neutralize effectively any resistance, which can be offered in execution of the .....

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ned Magistrate extended the said time limit up to 29.12.2015. Accordingly, the Advocate-Commissioner appears to have taken possession of the secured asset on 26.11.2015. A necessary report in that regard was drawn by the learned Advocate-Commissioner on 01.12.2015 and filed it before the learned Chief Metropolitan Magistrate. The grievance of the petitioner is that the Advocate- Commissioner, instead of strictly proceeding in terms of and in accordance with the warrant entrusted by the learned C .....

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Advocate-Commissioner. None appears for the respondent bank. Sri Gopal Krishna Murthy, learned counsel for the petitioner would principally contend that the provisions of the SARFAESI Act could not have been invoked by the respondent bank, at the first instance, inasmuch as the secured asset is an agricultural land and hence, it is exempted from being proceeded against. Therefore, there was a fundamental error of jurisdiction committed in invoking Section 14 of the Act and consequently, the exer .....

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est created in the instant case is the one created in agricultural land or merely in land. We have already noticed that the petitioner is the one, who has created the security interest in land comprising of Ac.1.03 guntas in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal, Ranga Reddy District by creating a mortgage and also by depositing the title deed thereof. There is no dispute on this score. Annexure-I to the mortgage deed dated 18.02.2009 executed and signed by the petitioner herein, .....

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ricultural land admeasuring Ac.1.03 guntas. Nowhere, the land was described as agricultural land. This apart, immediately after the description of the extent of land, the following expressions are used in Annexure-I of the mortgage deed: together with all structures thereon and all the things attached to the earth….. (Emphasis is placed now) Therefore, the petitioner, while creating a security interest by way of creating a mortgage in favour of the bank, has himself gone on record that th .....

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e record in the form of Pahanis and other documents obtained for the relevant years. It is true that the Pahanis and other village account has clearly brought out that the petitioner possesses land to the extent of Ac.1.03 guntas situated in Survey No. 51/EE, Alwal Village and also he possesses Ac.0.15 guntas of land in Survey No. 51/AA of the same village. When we look at the provisions of the Andhra Pradesh Rights in Land and Pattadar Passbooks Act, 1971, it emerges that the expression land wh .....

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Therefore, the record is prepared under Section 3 of the said enactment of every land, which is merely capable of being used for agricultural or horticulture purposes, but not necessarily being used as it is for the said purpose. Therefore, we have no difficulty to reject the contention of the learned counsel for the petitioner that since revenue record maintained under the aforementioned 1971 Act has been produced by him, it has to be invariably inferred that the security interest created by th .....

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d two separate limbs; one is taking possession of the secured asset and the next step is making over the said asset to the secured creditor. At the stage of making over the possession of the secured interest to the secured creditor, any person, whose interests are adversely impacted in the process of taking possession by the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, acting on its own or acting though a Commissioner appointed for the said purpose, is entitled t .....

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he Advocate-Commissioner in her affidavit filed before us, clearly brings out, in paragraph 3, that she has identified the scheduled property and executed the warrant and further went on to assert that the petitioner, his servants, his wife and several others stated that the house bearing D.No. 1-5-230 situated in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal, Ranga Reddy District belongs to the petitioner herein. We have to go by her statement of fact that the said house bearing D.No. 1- .....

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