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2010 DIGILAW 152 (MP)

Evision Associates v. UCO Bank

2010-02-05

SANJAY YADAV

body2010
JUDGMENT Sanjay Yadav, J. 1. I.A. No. 10851/2009, an application for dismissal of petition filed by respondent No. 3 is taken up for consideration. 2. It is the contention of the respondents that the petitioner has filed an Appeal under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 wherein the relief claimed is similar as is sought in this petition. It is submitted that the property in question was put to auction and the respondent No. 3 purchased the same and sale certificate has been issued in his favour on 8.4,2009 and he is in possession of the same. The respondents seek dismissal of the petition on these facts. 3. The petitioner opposes the application seeking dismissal of the petition. Learned Counsel for the petitioner submits that the issue raised in present Writ petition-cannot be tried by the Debts Recovery Tribunal. It is contended that the reserve price which was fixed for the immovable property sold in auction was fixed on the lower side, this aspect, it is submitted, is beyond the scope of the appellate jurisdiction of the Tribunal under Section 17 of the Act of 2002. 4. Before dwelling upon the issue raised for determination, first the relevant facts: The petitioner dealing in sale and supply of fast moving consumable goods products for better mobilization of its on going business availed the cash credit facility upto the amount of Rs. 3,50,000/- and by way of security mortgaged the plot No. 210-B situated at 'B' Sector, Sarvardharm Colony, K.K. Nagar, Village Damkheda, Kolar Road, Bhopal admeasuing 780 sq.ft. However, due to losses in business the petitioner could not keep its commitment with the bank as a result whereof the account became non-performing account. The respondent Bank -proceeded under the Act of 2002 and the property mortgaged as security was put to auction for recovery of the outstanding dues. The reserve price of the suit property was fixed as Rs. 3,20,000/-. 5. It is contended that though the property was worth better price arbitrarily lower price was reserved. The petitioner thereafter being aggrieved of the action of bank taken under Section 13(4) resorted to the remedy under Section 17 by preferring an appear before the Debts Recovery Tribunal wherein the interim relief sought by the petitioner was declined on 9.4.2009. 3,20,000/-. 5. It is contended that though the property was worth better price arbitrarily lower price was reserved. The petitioner thereafter being aggrieved of the action of bank taken under Section 13(4) resorted to the remedy under Section 17 by preferring an appear before the Debts Recovery Tribunal wherein the interim relief sought by the petitioner was declined on 9.4.2009. The petitioner thereafter preferred this petition wherein on 4.5.2009 while issuing notice on admission status quo was ordered to be maintained. The respondents who have entered appearance have raised the preliminary objection as to maintainability of this petition. 6. In order to appreciate the issue as to whether the Tribunal could in exercise of its appellate jurisdiction dwell into the merit regarding aspect of the fixation of the valuation of secured asset put to sale for realising the secured debt. 7. The answer of this issue lies in the appreciation of relevant provisions of the Act of 2002 and the rules framed thereunder viz., the Security Interest (Enforcement) Rules, 2002. 8. Chapter III of the Act of 2002 lays down provisions regarding Enforcement of Security Interest. 9. Sub-section (4) of Section 13 which we are presently concerned with provides for: 4. The answer of this issue lies in the appreciation of relevant provisions of the Act of 2002 and the rules framed thereunder viz., the Security Interest (Enforcement) Rules, 2002. 8. Chapter III of the Act of 2002 lays down provisions regarding Enforcement of Security Interest. 9. Sub-section (4) of Section 13 which we are presently concerned with provides for: 4. In case the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the Secured Creditor may take recourse to one or more of the following measures to recover his secured debt, namely: (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset; (b) takeover the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset: Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt: Provided further that where the management of whole, of the business or part of the business is severable the Secured Creditor shall take over the management of such business of the borrower which is relatable to the security or the debt; (c) appoint any person (hereafter referred to as the manager) to manage the secured assets the possession of which has been taken over by the Secured Creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets 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. 10. Section 38 confers power in the Central Government to frame rules. The Central Government in exercise of its power under Sections 38(1) and 38(2)(b) read with Sections 13(4), 13(10) and 13(12) has framed rules, viz., the Security Interest (Enforcement) Rules 2002; Rule 8 therein lays down the procedure regarding sale of immovable secured assets. Rule 8. Stipulates-- 8. 10. Section 38 confers power in the Central Government to frame rules. The Central Government in exercise of its power under Sections 38(1) and 38(2)(b) read with Sections 13(4), 13(10) and 13(12) has framed rules, viz., the Security Interest (Enforcement) Rules 2002; Rule 8 therein lays down the procedure regarding sale of immovable secured assets. Rule 8. Stipulates-- 8. Sale of immovable secured assets--(1) Where the secured asset is an immovable property the authorised officer shall take orcause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property. (2) The possession notice as referred to in Sub-Rule (1) shall also be published in two leading newspapers, one in vernacular language having sufficient circulation in that locality by the Authorised Officer. (3) In the event of possession of immovable property is actually taken by the Authorised Officer, such property shall be kept in his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property. (4) the Authorised Officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold, or otherwise disposed of. (4) the Authorised Officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold, or otherwise disposed of. (5) Before effecting sale of the immovable property referred to in Sub-rule (1) of Rule 9, the Authorised Officer shall obtain valuation of the property from an approved valuer and in consultation with the Secured creditor fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods: (a) by obtaining quotations-from the persons dealing with similar-secured assets or otherwise interested in buying the such assets; or (b) by inviting tenders from the public; (c) by holding public auction; or (d) by private treaty, (6) The Authorised Officer shall serve to the borrower a notice of thirty days for sale of the immovable secured assets under Sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include-- (a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor; (b) the secured debt for recovery of which the property is to be sold; (c) reserve price, below which the property may not be sold; (d) time and place of public auction or the time after which sale by any other mode shall be completed; (e) depositing earnest money as may be stipulated by the secured creditor; (f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property (7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the Authorised Officer deems if fit, put on the website of the secured creditor on the Internet. (8) Sale by any method other than public auction or public tender shall be on such terms as may be settled between the parties in writing. 11. Now coming to the jurisdiction of Debts Recovery Tribunal the same is conferred vide Section 17 which stipulates: 17. (8) Sale by any method other than public auction or public tender shall be on such terms as may be settled between the parties in writing. 11. Now coming to the jurisdiction of Debts Recovery Tribunal the same is conferred vide Section 17 which stipulates: 17. Right to appeal--(1) Any person (including borrower) aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter (may make an application along with such fee, as may be prescribed to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measures had been taken. (Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.) (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor are not in accordance with the provisions of this Act and the rules made thereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in Sub-section (4) of Section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be and pass such order as it may consider appropriate and necessary in relation to any of the recourses taken by the secured creditor under Sub-section (4) of Section 13. (4) If, the Debts Recovery Tribunal declares the recourse taken by a Secured Creditor under Sub-section (4) of Section 13, is in accordance with the provisions of this Act and the rules made thereunder, then, notwithstanding anything contained in any other law for the time being in force, the Secured Creditor shall be entitled to take recourse to one or more of the measures specified under Sub-section (4) of Section 13 to recover his secured debt. (5) Any application made under Sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application: Provided that the Debts Recovery Tribunal may, from time-to-time, extend the said period for reasons to be recorded in writing, so however, that the total period of pendency of the application with the Debts Recovery Tribunal shall not exceed four months from the date of making of such application made under Sub-section (1) (6) If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in Sub-section (5) any part to the application may make an application, in such form as may be prescribed to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal. (7) Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be dispose of application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993 and the rules made thereunder). 12. This provision thus empowers the Tribunal to consider whether any of the measures referred to in Sub-section (4) of Section 13 taken by Secured Creditor for enforcement of security are in accordance with the provisions of the 2002 Act and the rules made thereunder. 13. Combined reading of Sub-section (4) of Section 13 read with Rule 8 of the Rules would depict the measures which the Secured Creditor has to resort to before the enforcement of security, and therefore, in the considered opinion of this Court, it is within the appellate jurisdiction of the Tribunal to examine this aspect. 13. Combined reading of Sub-section (4) of Section 13 read with Rule 8 of the Rules would depict the measures which the Secured Creditor has to resort to before the enforcement of security, and therefore, in the considered opinion of this Court, it is within the appellate jurisdiction of the Tribunal to examine this aspect. The contention of the petitioner that the Tribunal will have no jurisdiction to determine the aspect of valuation of secured asset is devoid of substance and has no pedestal to stand. 14. The petitioner since has availed the remedy under Section 17 of the Act of 2002, present petition for same relief is not maintainable. 15.1.A. No. 10851/2009 is allowed. 16. The petition is dismissed. However, no costs.