TMI Blog2014 (8) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty is conducted on as-iswhere- is-basis, a prospective purchaser would not in the normal run of events participate in the auction without utilising the opportunity of inspection of the property. He would bid in the auction bearing in mind the existing situation, position and condition of the property. If the property is encumbrance free (includes the nonoccupancy factor) and amenities attached thereto are to his liking, most certainly he would offer a higher amount. The offer would most certainly be on the lower side, should the property be encumbered (occupied) or suffer from any disadvantages. In case the property is not to his liking, he is free not to participate in the auction. Once with open eyes he participates in the auction, he cannot expect a better deal that he was not assured of on the day he offered his bid - If an encumbrance exists, say the secured creditor has only been in symbolic possession with the borrowers in actual possession of the secured asset, and the prospective purchaser bids with full knowledge of such encumbrance, it is not open to him after the sale certificate is issued to contend that it carries with it the duty of the secured creditor to put h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002 sold on behalf of the Central Bank of India, Siliguri Branch in favour of Sri Mahendra Mahato Ms. Sarita Agarwal the immovable property shown in the schedule below secured in favour of the Central Bank of India, Siliguri Branch in Account Medilife towards the Cent Trade facility offered by Central Bank of India, Siliguri Branch to Mr. Sujit Kumar Singhania. The undersigned acknowledge the receipt of the sale price of ₹ 26.75 lacs (Rupees Twenty Six Lacs Seventy Five Thousand) only in full handed over the delivery and possession of the schedule property. This property has been sold AS IS WHERE IS BASIS AS IS WHAT IS BASIS as mentioned in Times of India [English] Aajkal [Bengali] on 12.04.2012 The sale of the scheduled property was made free from all encumbrances known to the secured creditor listed below on deposit of the money demanded by the undersigned. 3 . Upon being furnished the sale certificate, the petitioners vide letter dated December 17, 2012 requested the respondents to provide peaceful and vacant possession of the secured asset. Since no positive result yielded, a lawyer's notice dated April 27, 2013 was sent containing similar prayer. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) AIR 2008 Kerala 179: Kottakkal Co-operative Urban Bank v. T. Balakrishnan anr.; (iv) Bharatbhai Ramniklal v. Collector and District Magistrate, an unreported decision of the Gujarat High Court dated October 29, 2009; (v) AIR 2010 Madras 24 M/s. Kathikkal Tea Plantations etc. v. State Bank of India anr.; (vi) AIR 2006 Punjab Haryana 107: M/s. Kalyani Sales Company anr. v. Union of India ors.; and (vii) AIR 2011 Gauhati 19: Smt. Popi Chakraborty ors. v. Punjab National Bank ors. He, accordingly, prayed for relief as claimed in the writ petition. 6. Mr. Jha, learned advocate for the respondents, placed the affidavit-in-opposition, the contents whereof have been referred to above. According to him, the petitioners having purchased the secured asset with their eyes open and conscious of the stipulation that the secured asset would be sold on as-is-where-is basis cannot have any reason to complain now. He prayed for dismissal of the writ petition. 7. In reply, Mr. Roy referred to a supplementary affidavit dated June 2, 2014 of the petitioners and contended that the respondents themselves had approached the District Magistrate, Darjeeling under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the financial institution by following the procedure laid down particularly subrule (9) of Rule 9 of Security Interest (Enforcement) Rules, 2002. 11. The Apex Court decision in M/s. Transcore (supra) answered 3 (three) questions that arose for decision. The second question was whether recourse to take possession of the secured assets of the borrower in terms of Section 13(4) of the SARFAESI Act comprehends the power to take actual possession of the immovable property. The answer is found in the passage quoted below: 55. 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 concerned (mortgages) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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-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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iefs. Also under challenge was a notice dated October 31, 2006, received from the bank, directing the petitioner to hand over vacant possession of the premises to the bank failing which the petitioner was informed that coercive steps would be taken to evict him from the premises. The learned single judge found no infirmity in the notice issued by the bank and dismissed the writ petition. While dismissing the appeal, it was held in paragraph 6 as follows: 6. We are not impressed by the arguments of the counsel for the petitioner that the encumbrance enumerated in Rule 9(9) would not take in the occupation of the tenant. The word encumbrance cannot be given a restricted meaning. 'Encumbrance' means a liability which burdens the property, for example, lease, mortgage, easement, restriction, covenant, rent, charge etc. Encumbrance which can be carved out of ownership, generally are securities, leases, servitudes, trusts etc. It is generally a burden or charge upon the property. Lease is therefore an encumbrance over the property. In any view the borrower is bound by the terms and conditions stipulated in Annexure R2 dated 20-1-95, by which he had undertaken that he would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferee de facto possession and such liability of the secured creditor gives sufficient standing to sustain the application for dispossession of the secured debtor, of de facto possession over the security interest, by recourse to Section 14 of the Act. On this count also, a secured creditor who has not taken de facto possession but has proceeded and completed transferors (sic transfers) on the basis of de jure possession is entitled to apply for assistance of the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, for taking over actual physical possession from the secured debtor. The result of that proceedings would be that the secured debtor would be dispossessed of actual possession and de facto possession would be taken by the secured creditor, who would then, duty bound, as he is, transfer such de facto possession to the transferee of rights under Section 13(6) of the Act. 8. For the aforesaid reasons, the impugned order does not stand. The same is accordingly set aside and it is declared that the application of the writ petitioner (Ext. P1) is maintainable. The learned Chief Judicial Magistrate would accordingly take back Ext. P1 applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute will lead to defeat the object of the Act. Here, when the object is to speedy recovery of debt, by way of taking possession on transferring the property in favour of third party and issued a sale certificate, it cannot be contended that once the sale certificate is issued, physical possession cannot be taken by the secured creditors. Further, in this regard, a useful reference could be placed on the judgment reported in Kottakkal Co-op. Urban Bank Ltd. v. Balakrishnan (2008(2) KLT 456): (AIR 2008 Ker 179).*** 16. The Gauhati High Court in Popi Chakraborty (supra) was considering a challenge to the action taken by the respondent bank upon invocation of the provisions of the SARFAESI Act. The writ petition was dismissed. I have failed to notice any law laid down therein that would aid a decision for resolving the present controversy. 17. The Gujarat High Court in the unreported decision declined to entertain the petitions before it in view of availability of alternative remedy under Section 17 of the Act. No law has been laid down in such decision too, which assists me to answer the questions that this writ petition raises. 18. Turning attention to the facts of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the sale must be read as a whole. It must be given a purposive meaning. The word 'encumbrance' in relation to the word 'immovable property' carries a distinct meaning. It ordinarily cannot be assigned a general and/or dictionary meaning. 13. We may, however, notice some dictionary meanings of the said word as reliance thereupon has been placed by Mr. Sibaji Sen. In Stroud's Judicial Dictionary of Words and Phrases, 5th Edn., encumbrance is defined as: being, 'a claim, lien, or liability, attached to property'; and this definition is wide enough to cover the plaintiff's claim, which was, as assignee for value of a reversionary interest, against a person coming in under a subsequent title. In Supreme Court on Words and Phrases it is stated that the word 'encumbrance' means a burden or charge upon property or a claim or lien upon an estate or on the land. In Advanced Law Lexicon, encumbrance is defined as: An infringement of another's right or intrusion on another's property. In Black's Law Dictionary encumbrance is defined as: Any right to, or interest in, land which may subsist in another to diminution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent Company to use its own means to develop such road, and there was absolutely no obligation placed upon the appellant to provide to the respondent the access road. As the respondent Company was responsible for the creation of its own infrastructure, it has no legal right to maintain the writ petition, and the courts cannot grant relief on the basis of an implied obligation. The order of the High Court is in contravention of Clause 2(g) of the lease deed. 25. To the extent relevant for the present controversy, what follows from these decisions is this. Viewed in the context of sale of an immovable property on as-iswhere- is basis, the terms of the sale/auction notice are of paramount importance and have to be construed purposively. Normally, encumbrance is a burden or charge on property. To constitute an encumbrance in a case of the nature under discussion, one must be in a position to see or feel the encumbrance upon inspection of, inter alia, the land or the immovable property. To constitute an encumbrance, as held in AI Champdani Industries Ltd. (supra), there must be a burden on the property which must run with it and diminish its value. 26. There cannot be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured asset, and the prospective purchaser bids with full knowledge of such encumbrance, it is not open to him after the sale certificate is issued to contend that it carries with it the duty of the secured creditor to put him in actual possession of the secured asset. There is no reason as to why the principle of 'caveat-emptor' shall not apply in such a situation. 28. While construing the provisions of the SARFAESI Act that confers extensive powers to a secured creditor to recover its secured debt without the intervention of the Courts/Tribunals, one must not ignore the interest of the borrower. If the auction notice were to contain a clause that the sale on as-is-where-is basis would be followed by making over vacant physical possession of the property put up for auction (secured asset) to the auction purchaser, it would have attracted better offers and the highest bid received by the secured creditor, on its acceptance, would have enabled the secured creditor to appropriate its dues and remit the balance to the borrower. Absence of any such clause would obviously not arouse interest in purchasers who believe in value for money. 29. The petitioners must have notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the petitioners to be redressed. 32. However, in an appropriate case it would require consideration in view of the decision of the Apex Court reported in (2013) 9 SCC 620: Standard Chartered Bank v. V. Noble Kumar, as to whether a secured creditor would be empowered to put up an immovable property (secured asset) for sale without physical possession thereof being handed over to it in pursuance of a Section 14 action or without the secured creditor obtaining such possession independent of Section 14. It has been held there as follows: 36. Thus, there will be three methods for the secured creditor to take possession of the secured assets: 36.1. (i) The first method would be where the secured creditor gives the requisite notice under Rule 8(1) and where he does not meet with any resistance. In that case, the authorised officer will proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realise the amounts that are claimed by the secured creditor. 36.2. (ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under Rule 8(1) is given. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sets ***. Paragraph 36.2 reiterates that the notice under Rule 8(1), if followed by resistance, the secured creditor is free to proceed under Section 14 of the SARFAESI Act for activating the relevant magistrate to take possession of the secured asset through its authorised officer. My reading of Rule 8(1) of the 2002 Rules with Appendix IV was that the said provisions do not make service of a notice prior to taking possession of the secured asset mandatory, since the second paragraph of Appendix IV makes it clear that the notice follows possession of the secured asset being taken. This position has also been noticed in the passage quoted above from M/s. Transcore (supra), which was not placed when V. Noble Kumar (supra) was decided. However, my reading of the law is no longer of any relevance and since the decision in V. Noble Kumar (supra) now rules the field, I am bound to apply the law laid down therein. 35. The other important aspect discernible from V. Noble Kumar (supra), hitherto before not laid down either by the Apex Court or any other High Court, is relating to the right of action to approach the Tribunal under Section 17. It has been held that a n *** appeal under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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