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Calcutta High Court · body

2009 DIGILAW 695 (CAL)

ADI JOGESH RADIA v. STATE OF WEST BENGAL

2009-09-02

SANJIB BANERJEE

body2009
( 1 ) THE short grievance of the petitioners is that within five days of the respondent bank issuing a notice under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest act, 2002, it issued a letter to the petitioners informing them that certain fixed deposits and other collateral securities had been encashed. ( 2 ) THE petitioners raise a legal issue. According to the petitioners, since Section 13 (2) of the Act provides a 60-day period for a notice to revert to the bank, a secured creditor cannot be permitted to encash deposits or other collateral security furnished by the constituent in the interregnum. ( 3 ) SECTION 13 is at the heart of the said Act and provides the manner of enforcement of security interest by a secured creditor. Section 13 (2) of the act requires a secured creditor to issue notice to a defaulting borrower, who is under a liability to the secured creditor under a security agreement, to enable the borrower to discharge the entirety of the liabilities to the secured creditor within 60 days of the date of the notice; or else, suffer the measures enumerated in Section 13 (4) to be adopted by the secured creditor. "secured asset" is defined at Section 2 (zc) of the Act as the property on which security interest is created. "property" under Section 2 (t) of the Act includes moveable property, receivables and any debt or right to receive payment of money whether secured or unsecured. Section 2 (zf) defines "security interest" to mean the right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation and assignment other than those specified in Section 31 of the Act. Section 2 (zf) defines "security interest" to mean the right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor and includes any mortgage, charge, hypothecation and assignment other than those specified in Section 31 of the Act. ( 4 ) THE measures enumerated under Section 13 (4) of the Act are the following : (a) taking possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset ; (b) taking over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; subject to the preconditions specified ; (c) appointing any person to manage the secured asset, the possession of which has been taken over by the secured creditor; (d) requiring any person who has acquired any of the secured asset from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt. ( 5 ) THE notice under Section 13 (2) of the Act and the time afforded thereunder is to give the notice an opportunity to stave off the measures enumerated in Section 13 (4) of the Act being resorted to by the secured creditor. Section 13 (2) of the said Act would certainly place an embargo on the secured creditor to take any of the steps contemplated in Section 13 (4) without a notice being issued and without the statutory period running out. But such embargo would not extend to the measures otherwise available to the secured creditor but which have not been set down under Section 13 (4) of the Act. ( 6 ) IF a secured creditor had issued a notice under Section 13 (2) of the act and, without waiting for the period of 60 days thereafter, had proceeded to take any of the measures enumerated in Section 13 (4) of the Act; there is an argument possible that the conduct of the secured creditor would be in derogation of the statute. But if the secured creditor resorts to any measure not referred to in Section 13 (4) and informs the borrower of the credit given to the borrower upon adopting such other measure, the secured creditor's conduct cannot be questioned on the ground of it having acted contrary to the scheme of the said Act of 2002. The embargo of 60 days contemplated in Section 13 (2) would only apply to the measures enumerated in Section 13 (4) and would not extend to any other measure available to the secured creditor to lessen its exposure to the borrower. ( 7 ) THE legal issue is answered against the petitioners. ( 8 ) W. P. No. 5349 (W) of 2009 is dismissed. There will be no order as to costs.