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2011 DIGILAW 248 (GUJ)

Analkumar Rajkishore Mishra v. Dena Bank

2011-03-25

J.B.PARDIWALA, S.J.MUKHOPADHAYA

body2011
JUDGMENT S.J. Mukhopadhaya, J. The petitioners - Directors of M/s. Rajdeep Chemicals & Fertilizers Limited (hereinafter referred to as 'the Company') are the guarantors and the Company is the borrower. The Company obtained Cash Credit Hypothecation facilities to the tune of Rs. 15.00 lakh from the 1st respondent -Dena Bank (hereinafter referred to as 'the Bank'), which was enhanced to Rs. 40 lakh for development of business. Due to non-payment of the dues, the account of the Company was declared Non-Performing Asset (N.P.A.). The Bank for taking measures under Sub-section (4) of Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SRFAESI Act' for short) issued notice dated 9th February, 2010 on the guarantors to handover possession of the secured assets to the Authorised Officer of the Bank, including the movable and immovable properties mentioned therein. It was directed to handover the possession on 18th February, 2010 at 11.00 a.m. The petitioner-guarantors when moved an appeal u/s 17 of the SRFAESI Act before the Debt Recovery Tribunal - II, the said Tribunal by the impugned order dated 7th September, 2010 refused to entertain the appeal u/s 17 on the ground that it is not maintainable being premature. This order is under challenge in the present case. While learned Counsel appearing on behalf of the petitioners would contend that the impugned notice dated 9th February, 2010 amounts to measures taken under Sub-section(4) of Section 13 of the SRFAESI Act, and thereby, appeal u/s 17 is maintainable, according to learned Counsel for the Bank, possession of the movable or immovable assets having not yet taken, it cannot be held that any measures under Sub-section (4) of Section 13 have been taken, and, thereby, appeal u/s 17 being premature, was not maintainable. 2. Learned Counsel appearing on behalf of the Bank referred to the notice dated 9th February, 2010. At paragraph No. 3 therein, the Authorised Officer of Dena Bank while asking the petitioners to handover possession of the secured assets to him, observed as follows: 3. 2. Learned Counsel appearing on behalf of the Bank referred to the notice dated 9th February, 2010. At paragraph No. 3 therein, the Authorised Officer of Dena Bank while asking the petitioners to handover possession of the secured assets to him, observed as follows: 3. The undersigned being the Authorised Officer of Dena Bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 in exercise of the powers conferred u/s 13(2) read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 hereby demand from you to handover the possession of the secured assets to the Authorised Officer on the following date and time: S. No. Nature of Property Description 1. Movables Hypothecation of Book Debts, All stock of Goods, Raw Materials, Plant and Machineries, tools, 2. Immovable Property 503, 504, 505 & 506, Monalisa Complex, Sayajiganj Vadodara 3. According to Counsel for the Bank, the notice having been issued under Sub-section(2) to Section 13 read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Securitisation Rules, 2002'), appeal u/s 17 was premature. Such appeal could have been filed not at the stage of notice, but only after taking over of possession of the movable and immovable property in question. No appeal u/s 17 at the stage of notice is maintainable before the Debt Recovery Tribunal in absence of any cause of action. He placed reliance on paragraph No. 68 of the Supreme Court decision in Mardia Chemicals Ltd. Vs. Union of India (UOI) and Others Etc. Etc., AIR 2004 SC 2371 wherein the Supreme Court observed that: The remedy of appeal available under the Act as contained in Section 17 can be availed only after measures have already been taken by the secured creditor under Sub-section (4) of Section 13 of the Act which includes sale of the secured assets, taking over its management and all transferable rights thereto. (Emphasis added) He would submit that possession having not yet been taken nor any other measures under Sub-section (4) of Section 13 having taken, in view of Supreme Court decision, the appeal u/s 17 is not maintainable. 4. The only question that arises for determination in the present case is 'whether service of a notice for possession of asset amounts to measures taken under Sub-section (4) of Section 13 of the SRFAESI Act'. 5. 4. The only question that arises for determination in the present case is 'whether service of a notice for possession of asset amounts to measures taken under Sub-section (4) of Section 13 of the SRFAESI Act'. 5. Under Sub-section (4) of Section 13 of the SRFAESI Act, secured creditor has been empowered to take recourse to one or more of the measures to recover its secured debts, in case the borrower fails to discharge his liability in full within the period specified in Sub-section (2) of Section 14, as quoted hereunder: 14(2) For the purpose of securing compliance with the provisions of Subsection (1), the Chief Metropolitan Magistrate of the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. 6. For exercising the right to transfer by way of lease, assignment or sale of the secured asset or for management of the business, possession is required to be taken under Sub-section (4) of Section 13. The manner in which such possession can be taken has been prescribed under the Securitisation Rules, 2002. The procedure after issuing notice for taking over possession of movable assets has been prescribed under Rule 4. As per the said Rule, if the amount mentioned in the demand notice is not paid within the prescribed time, the Authorised Officer shall proceed to realise the amount by taking possession of the movable secured asset in presence of two witnesses, relevant portion of which is quoted hereunder: 4.(1) Where the possession of the secured assets to be taken by the secured creditor are movable property in possession of the borrower, the Authorised Officer shall take possession of such movable property in the presence of two witnesses after a Panchnama drawn and signed by the witnesses as nearly as possible in Appendix I to these rules. If the secured asset is immovable property and the Authorised Officer intends to take recourse to sale of such immovable secured asset, a possession notice is required to be served on the borrower under Rule 8, which is also required to be published in two leading newspapers, relevant portion of which is quoted hereunder: 8. If the secured asset is immovable property and the Authorised Officer intends to take recourse to sale of such immovable secured asset, a possession notice is required to be served on the borrower under Rule 8, which is also required to be published in two leading newspapers, relevant portion of which is quoted hereunder: 8. (2) The possession notice as referred to in Sub-rule (1) shall also be published, as soon as possible but in any case not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language leaving sufficient circulation in that locality, by the Authorised Officer. Under Rule 9, time of sale, issues of sale certificate and delivery of possession has been prescribed. 7. In case the secured creditor fee's difficulty in taking possession of movable or immovable secured asset, u/s 14 of the SRFAESI Act it is open to the secured creditor to take assistance of District Magistrate/Chief Metropolitan Magistrate/Chief Judicial Magistrate for taking such possession, as quoted hereunder: 14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.-- (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall, on such request being made to him-- (a) take possession of such asset and documents relating thereto; and (b) forward such assets and documents to the secured creditor. (2) For the purpose of securing compliance with the provisions of Subsection (1), the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may, in his opinion, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any Court or before any authority. 8. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any Court or before any authority. 8. From the aforesaid provisions of law, it will be evident that the notice for possession, preparation of Panchnama of such possession, notice to sell the property, to take assistance of District Magistrate/Chief Metropolitan Magistrate/Chief Judicial Magistrate for taking over possession, one or other step as referred to above, amounts to measures taken under Sub-section (4) of Section 13 of the SRFAESI Act, and therefore, an appeal u/s 17 of the said Act against such measures is maintainable, if the action is against the Act or Rules framed thereunder. In this background, we are of the view that it was not open to the Debt Recovery Tribunal to reject the appeal u/s 17 of the Act on the ground that it was premature or not maintainable. For the said reason, we set aside the impugned order dated 7th September, 2010 passed by the Debt Recovery Tribunal-II, Ahmedabad, in Securitisation Application No. 19 of 2010. 9. In the present case, the impugned notice is purported to have been given u/s 13(2) read with Rule 9 of the Securitisation Rules, 2002, but that appears to be a wrong reference of provision of law made in the impugned letter. Notice u/s 13(2) of the Act was already issued by the Bank on 14th November, 2009, wherein a sum of Rs. 14,67,420/- was shown due. The petitioners and the principal borrowers filed their objections u/s 13(3 A) by their letter dated 2nd December, 2009. Rule 9, of which reference has been made in the impugned letter dated 9th February, 2010, relates to time of sale, issues of sale certificate and delivery of possession, whereas, Rule 4 deals with the procedure to be adopted by Authorised Officer for taking over possession of movable property, and Rule 8 relates to taking possession of immovable property. Thus, it appears that the notice dated 9th February, 2010 is related to notice u/s 13(4) of the SRFAESI Act read with Rule 8 of the Securitisation Rules, 2002. Thus, it appears that the notice dated 9th February, 2010 is related to notice u/s 13(4) of the SRFAESI Act read with Rule 8 of the Securitisation Rules, 2002. However, such issue is not required to be dealt with at this stage as finally no action has been taken in pursuance of notice dated 9th February, 2010, and the learned Counsel appearing on behalf of the Bank submits that fresh steps will be taken for taking possession u/s 13(4) and in accordance with law. For the reasons aforesaid, except the declaration relating to the impugned order of the Debt Recovery Tribunal dated 7th September, 2010 in Securitisation Application No. 19 of 2010, as given above, no further order is required to be passed in the present case, though it will be open to the Bank to proceed in accordance with law and it is for the borrowers to exercise their right in accordance with law. The writ petition is allowed with aforesaid observations, but there shall be no order as to costs.