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2008 DIGILAW 259 (GAU)

Jagrit Foods Pvt. Ltd. v. United Bank of India

2008-04-03

T.NANDAKUMAR SINGH

body2008
ORDER T.N.K. Singh, J. 1. As agreed to by the learned Counsel appearing for the parties and also in the interest of Justice, this writ petition is taken up for disposal at this stage. 2. Admittedly, the petitioner company obtained loan as well as over drafts facilities for an amount of Rs. l(one) crore for loan and Rs. 3(three) crores as over draft from the United Bank of India, having its branch office at Asaf Ali Road, New Delhi. It is alleged that as the borrower i.e. the petitioner No. 1 Company had failed to repay the loan as per the terms and conditions of the agreement entered into between the borrower-the petitioner No. 1 Company and the secured creditor - United Bank of India, the Secured Creditor (United Bank of India) had issued impugned notice dated 16-10-2006 under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short Act, 2002) to the borrower petitioner No. 1 Company for taking up steps mentioned in Section 13(4) of the Act, 2002. It is stated that the borrower -petitioner No. 1 Company, after receiving the impugned letter dated 16-10-2006 had filed the representation dated 12-4-2007 (Annexure 13 to the present writ petition) and the representation dated 16-8-2007 (Annexure 14 to the writ petition) to the secured creditor (Bank). 3. The only grievance in the present writ petition is that the secured creditor (Bank) without complying the provision contemplated in Section 13(3A) of the said Act, 2002 had proceeded further for initiating the proceeding contemplated in Section 13(4) of the Act, 2002. For easy reference Section 13(3A) of the said Act, 2002 is quoted hereunder: 13(3A). If, on receipt of the notice under Sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non acceptance of the representation or objection to the borrower. provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A. 4. Mr. G.N. Sahewalla, learned Senior Counsel appearing for the borrower petitioner Company contends that it is the mandatory requirement for the secured creditor (Bank) to give reply to any representation or any objection filed by the borrower petitioner No. 1 Company to the notice under Section 13(2) of the Act, 2002. In support of his contention, Mr. Sahewalla has placed reliance on the decision of the Apex Court in Mardia Chemicals Ltd. and Ors. v. Union of India and Ors. AIR 2004 SC 2371 . The Apex Court in Mardia Chemicals Ltd. and Ors. (supra) had indicated that the reason and logic of Section 13(1) and Section 13(2) of Section 13 of the Act, 2002 are that the secured creditor may be checked to communicate the reason for not accepting the objections, if raised and before he takes the measures like taking over possession of the secured assets, etc. The learned Senior counsel further contends that the ratio laid down by the Apex Court in Mardia Chemicals Ltd. and Ors. (supra) is that the secured creditor should communicate the reason for not accepting the objection if raised to the borrower-petitioner Company before the secured creditor takes the measures like taking over possession of the secured assets etc. under Section 13(4) of the Act, 2002. Further under Rule 3A of the Security Interest (Enforcement) Rules 2002, the secured creditor has to give reply to the representation filed by the borrower within 7 days from the date of receipt of the representation/objection. For easy reference Rule 3A of the Security Interest (Enforcement) Rules, 2002 is quoted hereunder: Rule 3A. Reply to representation of the borrower.- (a) After issue of demand notice under Sub-section (2) of Section 13, if the borrower makes any representation or raises any objection to the notice, the Authorised Officer shall consider such representation or objection and examine whether the same is acceptable or tenable. Reply to representation of the borrower.- (a) After issue of demand notice under Sub-section (2) of Section 13, if the borrower makes any representation or raises any objection to the notice, the Authorised Officer shall consider such representation or objection and examine whether the same is acceptable or tenable. (b) If on examining the representation made or objection raised by the borrower, the secured creditor is satisfied that there is a need to make any changes or modifications in the demand notice, he shall modify the notice accordingly and serve a revised notice or pass such other suitable orders as deemed necessary, within seven days from the date of receipt of the representation or objection. (c) If on examining the representation made or objection raised, the Authorised Officer comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection, the reasons for non-acceptance of the representation or objection, to the borrower. 5. On perusal of the record as well as from the submission of the learned Counsel appearing for the parties, it appears that secured creditor has not yet replied by giving reasons to the said two representations dated 12-4-2002 (Annexure 13) and 16-8-2002 (Annexure 14 to the writ petition). This Court is of the considered view, that if there is a failure on the part of the borrower to repay the loan, the secured creditor has the right to take action contemplated in Section 13(4) of the said Act, 2002. But the secured creditor has to fulfil all the requirements contemplated in Section 13(3A) of the Act, 2002 and Rule 3A of the Security Interest (Enforcement) Rules 2002, which are quoted above, before taking up one of the steps contemplated in Section 13(4) of the Act, 2002. 6. Having regard to the provisions of the said Act, 2002 and the Security Interest (Enforcement) Rules 2002, this writ petition is disposed of by directing the secured creditor (Bank) to give reply to the said representations (Annexures 13 and 14 to the writ petition) and also to the representation which is being filed within 2 weeks from today by the borrower as permitted by this Court within 2 months from the date of receipt of the certified copy of this order. After such reply it is left to the wisdom of the secured creditor to take necessary steps as permitted by law. 7. With the above observations and directions, this writ petition is allowed in part.