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2012 DIGILAW 820 (CAL)

Zephyr Exports Pvt. Ltd. v. Central Bank of India

2012-08-30

DIPANKAR DATTA

body2012
JUDGMENT : Dipankar Datta, J. 1. In this writ petition, affirmed on May 9, 2012, the petitioners have prayed for quashing of notices dated July 22, 2002 and March 14, 2012 issued by the authorised officer of the respondent No. 1/Bank. While the former was issued u/s 13(2) of the Securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act (hereafter the Act), the latter was issued u/s 13(4) thereof read with Rule 8(1) of the Security Interest (Enforcement) Rules. Primarily, three points have been urged by Mr. Dutta, learned Advocate representing the petitioners in support of the prayer for quashing of the impugned notices. The same are: (i) Considering the object sought to be achieved by introduction of the Act i.e. enforcement of security interest created in favour of a secured creditor without intervention of Courts or Tribunals, it must be held that measures u/s 13(4) ought to follow within a reasonable period from lapse of the period fixed in the demand notice u/s 13 (2) thereof for clearing the liability. However, in the present case there is a hiatus of more than 9 years between issuance of the demand notice and the possession notice and the unduly delayed act of taking of possession must be held to be barred by limitation. (ii) No security interest was created in respect of Plot No. 304 and, therefore, the respondent No. 2 acted without jurisdiction in taking possession of the same. (iii) Action of the respondent No. 2 in taking possession is also bad because a representation dated August 8, 2002 made by the petitioners in response to the demand notice dated July 22, 2002 was not considered and answered. In aid of the first point as noted above, reliance was placed by Mr. Dutta on the decisions of the Supreme Court in Gram Panchayat, Kakran Vs. Addl. Director of Consolidation and Another, (1997) 8 SCC 484 and The State of Gujarat Vs. Patil Raghav Natha and Others, AIR 1969 SC 1297 whereas the Bench decision of this Court in Debasree Das Vs. The State of West Bengal and Others, AIR 2011 Cal 57 was relied on in support of the second point. 2. Law is well settled that once the secured creditor takes a measure of the nature permitted by Section 13(4) of the Act, the High Court in exercise of writ powers ordinarily ought not to interfere. The State of West Bengal and Others, AIR 2011 Cal 57 was relied on in support of the second point. 2. Law is well settled that once the secured creditor takes a measure of the nature permitted by Section 13(4) of the Act, the High Court in exercise of writ powers ordinarily ought not to interfere. It is only in exceptional cases when the Court is fully convinced that the secured creditor could not have invoked the provisions of the Act against the borrower or any other person that interference is called for. A case where commission of error by a secured creditor while exercising jurisdiction is demonstrated ought to be left for decision by the Tribunal. It is also well settled that if adjudication of a point would necessitate leading of evidence on factual aspects, the Court may not interfere even though a prima facie case for interference appears to have been set up. In this connection, one is reminded of the decision of the Supreme Court in Kanaiyalal Lalchand Sachdev and Others Vs. State of Maharashtra and Others, (2011) 2 SCC 782 , wherein interference was declined, inter alia, on the specious ground that receipt or non-receipt of the demand notice u/s 13(2) of the Act would involve adjudication of a disputed question of fact for which the Tribunal constituted u/s 17(1) thereof is best suited. 3. The decision in United Bank of India Vs. Satyawati Tondon and Others, AIR 2010 SC 3413 is another decision of recent origin wherein the Supreme Court has observed that interference with proceedings initiated under the Act ought not to follow at the drop of a hat but the High Courts must exercise great care, caution and circumspection in that regard or else the very object of the Act would be defeated. 4. Two out of the three points urged by Mr. Dutta would involve adjudication of disputed questions of fact in view of the submission of Ms. Doshi, learned Advocate for the respondents 1 and 2. She has produced evidence to demonstrate that the respondents 3 and 4, by their letter dated May 13, 2000, had clearly expressed intention to create equitable mortgage in favour of the Bank in respect of, inter alia, Plot No. 304 for sanction of credit facilities in favour of the petitioner No. 1. 5. The moment Mr. She has produced evidence to demonstrate that the respondents 3 and 4, by their letter dated May 13, 2000, had clearly expressed intention to create equitable mortgage in favour of the Bank in respect of, inter alia, Plot No. 304 for sanction of credit facilities in favour of the petitioner No. 1. 5. The moment Mr. Dutta disputes such evidence and proceeds to contend that no mortgage deed was executed and, therefore, security interest in respect of Plot No. 304 was not created, the points as to whether a mortgage deed was required to be executed or not and further as to whether the documents placed before this Court are sufficient to hold that security interest in respect of Plot No. 304 was created would require adjudication after extending opportunity to the rival parties to lead evidence in support of their respective claims and decision thereon must be given, at the first instance, by the Tribunal. 6. Ms. Doshi has also submitted that the representation of the petitioners dated August 8, 2002 was never served on any official of the respondent No. 1 and, therefore, the respondents 1 and 2 did not owe any duty to respond. Although Mr. Dutta has not produced any evidence to rebut Ms. Doshi, I do not intend to decide the point finally. If at all occasion for the petitioner to approach the Tribunal arises, the same may be raised for effective adjudication by it according to law. 7. However, the first point urged by Mr. Dutta involves an important question of law touching upon the jurisdiction of the respondent No. 2 and, therefore, ought to be addressed. 8. The Act does not stipulate any period for a secured creditor to take measures u/s 13(4) of the Act after the period of 60 days mentioned in Section 13(2) of the Act for discharge of liability by the borrower expires. 8. The Act does not stipulate any period for a secured creditor to take measures u/s 13(4) of the Act after the period of 60 days mentioned in Section 13(2) of the Act for discharge of liability by the borrower expires. The position that emerges on reading Section 13 of the Act is that a secured creditor may issue a notice under Sub-section (2) thereof after the account of the borrower is classified as non-performing asset; the statute allows a period of 60 days from date of receipt of the demand notice to enable the borrower to clear his liability and thereby to erase the secured debt or to represent that he is not liable; and, if the liability is not cleared or the objection/representation, if any, against the demand notice is rejected, right to take measures under Sub-section (4) accrues in favour of the secured creditor, However, there is no compulsion that the secured creditor, upon being entitled, must exercise all or any of the rights under Sub-section (4) within a time-frame or reasonable time. The secured creditor may or may not exercise the rights that accrue in its favour. It is true that the Act was enacted to speed up enforcement of security interest against recalcitrant and defaulting borrowers, but the provisions of the Act cannot be read in a manner to restrict the right of the secured creditor to exercise its rights for recovery of the secured debt beyond a particular time after expiry of 60 days from date of receipt of the demand notice u/s 13(2) of the Act by the borrower. Failure and/or neglect of the secured creditor to take measures u/s 13(4) of the Act immediately after accrual of right in this behalf, to my mind, enures to the benefit of the borrower. The law does not say that the borrower may not clear the liability after 60 days from date of receipt of the demand notice has lapsed. The borrower, even at any point of time thereafter, may garner funds and approach the secured creditor for clearing the liability. I hold that till such time the account of a borrower remains a non-performing asset, it is open to the secured creditor to exercise any or all the rights accruing to it by taking measures u/s 13(4) of the Act. I hold that till such time the account of a borrower remains a non-performing asset, it is open to the secured creditor to exercise any or all the rights accruing to it by taking measures u/s 13(4) of the Act. No limitation having been prescribed either expressly or by necessary implication, in Section 13 or in any other section, the Court would be loath to read limitation therein. 9. The decisions cited by Mr. Dutta do not assist the petitioners in any manner whatsoever. 10. In Gram Panchayat, Kakran (supra), the Supreme Court was considering whether delay of 40 years in filing an application u/s 42 of the East Punjab Holdings (Consolidation and Prevention of Fragmentation) Rules, 1949 could have been condoned. The portion of the judgment on which reliance was placed lays down that even where no period of limitation is prescribed, the party aggrieved is required to move the appropriate authority for relief within a reasonable time. For such proposition, no case law is required to be cited. I wonder how the decision can have any application on facts and in the circumstances of the present case. Obviously, the secured creditor was not approaching any Court for relief; on the contrary, it was enforcing a right that accrued in its favour consequent to the borrower failing to perform its obligation. So long the obligation was not discharged, the right to take measures for taking over possession did not stand eclipsed. 11. A reading of the decision in Patil Raghav Natha (supra) reveals that the Commissioner, Rajkot Division by his order dated October 12, 1961 set aside the order of the Collector, dated July 2, 1960, granting permission to the respondent in the civil appeal to use some land in Survey No. 417 for non-agricultural purposes. The order of the Commissioner was challenged before the High Court. The challenge succeeded. Before the Supreme Court, the question that arose was whether the Commissioner could revise an order made u/s 65 of the relevant statute at any time. The Court found that there was no period of limitation prescribed u/s 211, but it seemed plain that the revisional power must be exercised within reasonable time and the length of the reasonable time must be determined by the facts of the case and the nature of the order which is being revised. The Court found that there was no period of limitation prescribed u/s 211, but it seemed plain that the revisional power must be exercised within reasonable time and the length of the reasonable time must be determined by the facts of the case and the nature of the order which is being revised. The Court was further of the view that Section 65 itself indicated the reasonable time within which the Commissioner could act u/s 211. The ratio of the decision if read with the discussions in paragraph 9 (supra) would leave no manner of doubt that the point urged by Mr. Dutta is without merit. 12. In Debasree Das (supra), the Division Bench interfered despite availability of an alternative remedy since the unauthorized act was apparent on the face of the defence that was taken. The Bench recorded a categorical finding that no valid mortgage was created. That is not the case here. As observed earlier, there is no manifest unauthorised act of the Authorised Officer. Decision as to whether mortgage was created or not would necessarily involve investigation of factual aspects. The decision is thus distinguishable. 13. For the reasons aforesaid, I am of the view that no case for interference has been set up by the petitioners, at least at this stage. The writ petition stands dismissed, without costs. This order shall not preclude the petitioners to approach the Tribunal u/s 17(1) of the Act, strictly in accordance with law. Urgent photostat certified copy of this judgment and order, if applied for, shall be furnished to the applicant at an early date.