TMI Blog2019 (1) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of the secured assets. Further, once the right to approach DRT matures and securitization application under Section 17(1) is filed by the borrower, it is open to the DRT to deal with the same on merits and pass appropriate orders in accordance with law. The remedy available under Section 17(1) of the Act challenging proceedings under Section 13(4) of the 2002 Act would be available without losing symbolic or physical possession - the borrower or any other aggrieved person would be entitled to invoke the jurisdiction of the DRT under Section 17(1) of the 2002 Act on issuance of notice under Section 13(4) of the said Act. Petition allowed - The matter is remitted to the DRT to decide the application under Section 17 of the 2002 Act afresh on merits in accordance with law. - CWP No. 19318 of 2018 - - - Dated:- 15-11-2018 - MR AJAY KUMAR MITTAL AND MR AVNEESH JHINGAN, JJ. For The Petitioner : Mr. Lalit Thakur, Advocate for Mr. V.K. Sachdeva, Mr. C.S. Pasricha, Advocate, Mr. Vivek Goyal, Advocate, Ms. Stuti Bamba, Advocate and Ms. Anna Bansal, Mr. Keshav Gupta, Advocate, Mr. C.K. Jha, Advocate, Mr. Akhilesh Vyas, Advocate, Mr. Manoj Kaushik, Advocate, Mr. Panka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough DM Ghaziabad and others, 2018(2) RCR (Civil) 234, holding that without losing physical possession, the borrower cannot approach the DRT by filing securitization application under Section 17 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short, the 2002 Act ) which view is now unsustainable in view of the previous and subsequent judgments of the Hon ble Apex Court. Further direction has been sought to respondent No.3 to decide the above mentioned SA filed by the petitioners on merits in view of the order dated 22.3.2016 passed by this court in CWP No.4529 of 2016. 3. A few facts relevant for the decision of the controversy involved as narrated in CWP No.19318 of 2018 may be noticed. Petitioner No.1 is a private limited company registered under the Companies Act, 1956. In the year 2007, it was granted term loan of Rs, 1.60 crores and cash credit limit of Rs, 80 lacs. On 6.11.2011, the factory suffered a massive fire accident due to which substantial damage was caused to the assets of the company. Inspite of that, the petitioner though deposited the amounts regularly but there was some shortfall therein due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Bank to claim charges from the petitioners for taking illegal physical possession. The Bank filed its reply. The issues remained pending before the DRT. In the meantime, The Allahabad High Court in M/s Hindon Forge Pvt. Limited s case (supra) held that no securitization application can be filed by the borrower without first losing physical possession and if such a petition is filed, the same would be pre-mature. Consequently, the DRT dismissed SA No.525 of 2017 filed by the petitioners on the ground that since the physical possession had not been lost, therefore, it is not competent to adjudicate the matter and the SA was premature. According to the petitioners, a number of petitions have been dismissed by the DRT on the basis of the judgment of the Allahabad High Court against which writ petitions are pending in this Court. In these petitions, notice of motion has been issued and status quo regarding possession has been ordered to be maintained. The petitioners assert that after declaration of the account as NPA in terms of the Master Circular Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances, the bank issues notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers, CWP No.19028 of 2017 decided on 16.4.2017 (Madhya Pradesh). 6. On the other hand, learned counsel for the respondent Bank supported the impugned order passed by the DRT and submitted that the order has been passed in accordance with the law as laid down under the 2002 Act and no error has been committed by the DRT. Learned counsel relied upon judgment in Standard Chartered Bank vs. V.Noble Kumar and others, (2013) 9 SCC 620. Support was also drawn from decisions of the Supreme Court in Mardia Chemicals, Transcore , M/s NCML Industries Limited s cases (supra), Union Bank of India vs. Satyavati Tandon , (2010) 8 SCC 110, and Madras High Court in M/s Buhariya Traders vs. The Chief Metropolitan Magistrate, Allikulam, Chennai , 2018(1) CWC 64 (Madras). 7. The core issue that arises for consideration in these writ petitions is whether on issuance of notice under Section 13(4) of the 2002 Act, the borrower or any other person aggrieved of the action initiated there under can take recourse to Section 17 of the 2002 Act by filing an application thereunder without losing symbolic or physical possession of the secured asset. 8. Before adjudicating the controve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ism for enforcement of security interest. Sub-section (1) thereof lays down that notwithstanding anything contained in Sections 69 or 69-A of the Transfer of Property Act, 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. Sub-section (2) of Section 13 enumerates many steps needed to be taken by the secured creditor for enforcement of security interest. This sub-section provides that if a borrower, who is under a liability to a secured creditor, makes any default in repayment of secured debt and his account in respect of such debt is classified as non- performing asset, then the secured creditor may require the borrower by notice in writing to discharge his liabilities within sixty days from the date of the notice with an indication that if he fails to do so, the secured creditor shall be entitled to exercise all or any of its rights in terms of Section 13(4). Sub-section (3) of Section 13 lays down that notice issued under Section 13(2) shall contain details of the amount payable by the borrower as also the details of the secured assets i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Sub-section (9) of Section 13 deals with the situation in which more than one secured creditor has stakes in the secured assets and lays down that in the case of financing a financial asset by more than one secured creditor or joint financing of a financial asset by secured creditors, no individual secured creditor shall be entitled to exercise any or all of the rights under sub-section (4) unless all of them agree for such a course. Under, Sub-section (10) of Section 13 where dues of the secured creditor are not fully satisfied by the sale proceeds of the secured assets, the secured creditor may file an application before the Tribunal for recovery of balance amount from the borrower. Sub-section (11) states that without prejudice to the rights conferred on the secured creditor under or by this section, it shall be entitled to proceed against the guarantors or sell the pledged assets without resorting to the measures specified in clauses (a) to (d) of sub-section (4) in relation to the secured assets. Sub-section (12) of Section 13 lays down that rights available to the secured creditor under the Act may be exercised by one or more of its officers authorised in this behalf. Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and the Rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor can take recourse to one or more of the measures specified in Section 13(4) for recovery of its secured debt. Sub-section (5) of Section 17 prescribes the time-limit of sixty days within which an application made under Section 17 is required to be disposed of. The proviso to this sub-section envisages extension of time, but the outer limit for adjudication of an application is four months. If the Tribunal fails to decide the application within a maximum period of four months, then either party can move the Appellate Tribunal for issue of a direction to the Tribunal to dispose of the application expeditiously. Section 18 provides for an appeal to the Appellate Tribunal. Section 31 grants exemption to situations enumerated thereunder. 12. Rule 2 of Security Interest (Enforcement) Rules, 2002 (in short, the 2002 Rules ) deals with procedure after issue of demand notice, rule 5 prescribes valuation of moveable secured assets, rule 6 relates to sale of moveable secured assets, under rule 7, issue of certificate of sale has been dealt with, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vires Article 14 of the Constitution. The said sub section provides for deposit of seventy five percent of the amount claimed before entertaining an appeal by the Debts Recovery Tribunal under Section 17 of the 2002 Act. It was observed by the Apex Court that in Mardia Chemicals s case (supra), it was made clear in para 80 of the judgment that all measures having been taken under Section 13(4) of the 2002 Act and before the date of sale auction, it would be open for the borrower to file a petition under Section 17 of the 2002 Act. It was recorded that this paragraph appeared to have been missed by the Full Bench of the Allahabad High Court. 16. Reference was also made by the Supreme Court to its judgment in Transcore s case (supra) to hold that the word possession is a relative concept and that the dichotomy between symbolic and physical possession does not find place under the 2002 Act. The V. Noble Kumar s case was also discussed by the Apex Court wherein it was held that it is not necessary to first resort to the procedure under Section 13(4) and on facing resistance, then approach the Magistrate under Section 14. Further, the secured creditor need not avail of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under Rule 8(1) is given. In that case he will take recourse to the mechanism provided under Section 14 of the Act viz. making application to the Magistrate. The Magistrate will scrutinise the application as provided in Section 14, and then if satisfied, appoint an officer subordinate to him as provided under Section 14(1-A) to take possession of the assets and documents. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary.After the possession is taken the assets and documents will be forwarded to the secured creditor. 36.3. ( iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly under Section 14 of the Act. The Magistrate will thereafter scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under clause 36.2.(ii) above. 36.4. In any of the three situations above, after the possession is handed over to the secured creditor, the subsequent specified provisions of Rule 8 concerning the preservation, valuation a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 of the Act at the stage of the possession notice referred to in Rules 8(1) and 8(2) of the Rules. The appeals were sent back to the Court/Tribunal dealing with the facts of each case to decide the same in accordance with law laid down by the Supreme Court. The operative part of the judgment rendered by the Supreme Court reads thus:- Appendix IV-A, therefore, throws considerable light on the controversy before us and recognises the fact that rule 8(1) and 8(2) refer to constructive possession whereas rule 8(3) refers to physical possession. We are therefore of the view that the Full Bench judgment is erroneous and is set aside. The appeals are accordingly allowed, and it is hereby declared that the borrower/debtor can approach the Debts Recovery Tribunal under section 17 of the Act at the stage of the possession notice referred to in rule 8(1) and 8(2) of the 2002 Rules. The appeals are to be sent back to the Court/Tribunal dealing with the facts of each case to apply this judgment and thereafter decide each case in accordance with the law laid down by this judgment. 18. In view of the law enunciated by the Apex Court, it is held that remedy available under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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