Research › Search › Judgment

Punjab High Court · body

2013 DIGILAW 1619 (PNJ)

Kunal Garg v. Punjab National Bank

2013-12-06

AJAY K.MITTAL, G.S.SANDHAWALIA

body2013
JUDGMENT Mr. G.S. Sandhawalia, J.:- The present writ petition has been filed under Articles 226/227 of the Constitution of India for quashing notice dated 07.06.2012 (Annexure P-4), issued under Section 13(2) of the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for brevity, the ‘SARFAESI Act’) and notice dated 07.11.2012 (Annexure P-7), wherein the authorized officer of the respondent-Bank called upon the petitioner to deliver possession of the secured assets on or after 08.12.2012. 2. The pleaded case of the petitioner is that the petitioner stood as guarantor for securing loan sanctioned to respondent No.3 by mortgaging property measuring 16 kanals 6-1/9 marla situated at Village Gill Patti, Tehsil and District Bhatinda, which was agricultural land on which popular trees were planted and wheat crops had been sown. 3. Respondent No.3, M/s D.G.Exports had been sanctioned the fund based limit (FBL) of Rs.50 lacs and the foreign letter of credit (FLC) of Rs.1800 lacs. The property had also been mortgaged in favour of the Bank to secure the credit facilities to M/s S.N.Oversees which was a proprietorship concern of M/s Neeru Garg. 4. Counsel for the petitioner has vehemently submitted that the property in question is agricultural land and, therefore, the Bank’s resort to the provisions of the SARFAESI Act was not justified. Reference was made to Section 31(i) to contend that the SARFAESI Act would not apply to any security interest created in agricultural land. It was next contended that action under Section 13(4) had not been initiated and, therefore, the action of the Bank in directly seeking the assistance of the police authority without approaching the District Magistrate under Section 14 was not permissible. 5. The said submissions of the counsel for the petitioner are without any basis. A perusal of the annexures appended with the petition shows that the property is situated at Gali No.9, Adarsh Nagar, Goniana Road, Bhatinda and the nature of the land is a mixed area since civic amenities are available nearby and the locality is served by bus, car, scooter etc. A street abutting in the South and road in West side of the plot in question exists, as per the report of the evaluator. Therefore, prima facie, it cannot be said that the plot in question, is agricultural land though it might be described in the revenue records as such. A street abutting in the South and road in West side of the plot in question exists, as per the report of the evaluator. Therefore, prima facie, it cannot be said that the plot in question, is agricultural land though it might be described in the revenue records as such. Further, the plot may fall within the municipal limits and is in a developed colony. The nature of the land being agricultural or not would require adjudication after leading evidence and whether the popular trees are planted, photographs of which are appended, would be considered by the Tribunal while determining the jurisdiction of the Bank to resort to the provisions of the SARFAESI Act. 6. On the next submission of the learned counsel for the petitioner relating to no action having been taken under Section 13(4) and, therefore, it cannot approach the Tribunal in the absence of any action under Section 13(4) is also without any basis. A perusal of the notice dated 07.06.2012 under Section 13(2) of the Act shows that the account of the borrower has been classified as nonperforming asset and the Bank had communicated to the concerned parties including the petitioner that they were unable to permit continuation of the facilities granted and recalled and revoked the above facilities. The amount due to the Bank was Rs.12,04,75,884/- plus interest and other charges w.e.f. 01.06.2012. The borrower had represented on 28.07.2012, wherein he had taken the plea that he had arranged fund of Rs.5 crores for starting of operations which was to be deposited towards the foreign letter of credits and, thereafter also, submitted another representation dated 22.08.2012, praying for various relaxations. It was only, then, that the Bank issued possession notice dated 07.11.2012 wherein it had sought the borrower and the petitioner to deliver possession of the secured assets by 08.12.2012 failing which the authorized officer would take possession of the secured assets. A copy of the said letter was addressed to the Superintendent of Police/Commissioner of Police, Bathinda for deputing sufficient police personnel to maintain law and order. The petitioner never filed any objection against the notice under Section 13(2) of the Act which the Bank could take into account and the Bank, thus, proceeded in accordance with law, seeking delivery of possession. 7. The petitioner never filed any objection against the notice under Section 13(2) of the Act which the Bank could take into account and the Bank, thus, proceeded in accordance with law, seeking delivery of possession. 7. On a pointed query, the petitioner expressed inability to deposit any sum of money which would prima facie show that he was willing to settle the dispute with the Bank. The Hon’ble Apex Court in M/s Transcore Vs. Union of India & another, [2007(1) Law Herald (SC) 927] : 2007 (1) PLR 222 has held that after issuing notice under Section 13(2), Banks or financial institutions are entitled to take possession of the secured assets of the borrower. The person aggrieved against the said action is entitled to move the Tribunal under Section 17 of the SARFAESI Act. It was further held that under Rule 8 of the Security Interest Enforcement Rules, 2002 (for brevity, the ‘Rules’),the authorized officer could take or cause to take in possession, by delivering a possession notice as prescribed in Appendix IV of the Rules. The submission of the petitioner that the authorized officer was not empowered to take possession by issuing notice under Rule 8 of the Rules was negated by the Hon’ble Apex Court and it was held that possession was a relative concept and not an absolute concept. The relevant portion reads as under: “Learned advocates submitted that notice in terms of Rule 8(1) of the 2002 Rules operates as attachment. It contemplates a symbolic possession. Learned advocates submitted that actual physical possession of immovable assets can be taken under Rule 8(3), in cases where there is a vacant plot or a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice under Rule 8(1); that actual physical possession is to be delivered only after confirmation of sale under Rule 9(6) read with Appendix V under which the authorised officer is empowered to deliver the property to the purchaser free from all encumbrances in terms of Rule 9(9) of the 2002 Rules. Learned advocates, therefore, submitted that the High Court was right in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice under Section 13(4) of the NPA Act so as to defeat the adjudication of his claim by the DRT under Section 17 of NPA Act, and that, physical possession can be taken only after the sale is confirmed in terms of Rule 9(9) of the 2002 Rules. We do not find any merits on the above contentions for the following reasons. The word possession is a relative concept. It is not an absolute concept. The dichotomy between symbolic and physical possession does not find place in the Act. As stated above, there is a conceptual distinction between securities by which the creditor obtains ownership of or interest in the property concerned (mortgages) and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the satisfaction of the debt (charges). Basically, the NPA Act deals with the former type of securities under which the secured creditor, namely, the bank/FI obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/ tribunals. Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under Section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets. Section 13(4-A) refers to the word “possession” simpliciter. There is no dichotomy in sub-section (4-A) as pleaded on behalf of the borrowers. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. It inter alia states that notice is given to the borrower who has failed to repay the amount informing him and the public that the bank/FI has taken possession of the property under Section 13(4) read with Rule 9 of the 2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and delivery of possession. Rule 9(6) states that on confirmation of sale, if the terms of payment are complied with, the authorised officer shall issue a sale certificate in favour of the purchaser in the form given in Appendix V to the 2002 Rules. Rule 9(9) states that the authorised officer shall deliver the property to the buyer free from all encumbrances known to the secured creditor or not known to the secured creditor. (emphasis supplied). Section 14 of the NPA Act states that 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, the secured creditor may, for the purpose of taking possession, request in writing to the District Magistrate to take possession thereof. Section 17(1) of NPA Act refers to right of appeal. Section 17(3) states that if the DRT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under Section 13(4) taken by the secured creditor are not in accordance with the provisions of the Act, it may by order declare that the recourse taken to any one or more measures is invalid, and consequently, restore possession to the borrower and can also restore management of the business of the borrower. Therefore, the scheme of Section 13(4) read with Section 17(3) shows that if the borrower is dispossessed, not in accordance with the provisions of the Act, then the DRT is entitled to put the clock back by restoring the status quo ante. Therefore, the scheme of Section 13(4) read with Section 17(3) shows that if the borrower is dispossessed, not in accordance with the provisions of the Act, then the DRT is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. As stated above, the NPA Act provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8, undoubtedly, refers to sale of immovable secured asset. However, Rule 8(4) indicates that where possession is taken by the authorised officer before issuance of sale certificate under Rule 9, the authorised officer shall take steps for preservation and protection of secured assets till they are sold or otherwise disposed of. Under Section 13 (8), if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charges and expenses referred to in Section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a court receiver under Order XL Rule 1 CPC. The court receiver can take symbolic possession and in appropriate cases where the court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorized officer under Rule 8 has greater powers than even a court receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules.” 8. Thus, in our opinion, in view of the above submission of the counsel for the petitioner that he cannot file an application under Section 17 of the SARFAESI Act, in such circumstances, is without any basis. Further, the Hon’ble Apex Court in the case of Kanaiyalal Lalchand Sachdev & others Vs. State of Maharashtra & others, [2011(3) Law Herald (SC) 1915] : 2011 (2) SCC 782 has held as under: “22.We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4), and therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT. 23. In our opinion, therefore, the High Court rightly dismissed the petition on the ground that an efficacious remedy was available to the appellants under Section 17 of the Act. It is well-settled that ordinarily relief under Articles 226/227 of the Constitution of India is not available if an efficacious alternative remedy is available to any aggrieved person. (See: Sadhana Lodh Vs. National Insurance Co. Ltd., Surya Dev Rai Vs. Ram Chander Rai & State Bank of India Vs. Allied Chemical Laboratories). 24. In City and Industrial Development Corporation Vs. Dosu Aardeshir Bhiwandiwala, this Court had observed that: “30. (See: Sadhana Lodh Vs. National Insurance Co. Ltd., Surya Dev Rai Vs. Ram Chander Rai & State Bank of India Vs. Allied Chemical Laboratories). 24. In City and Industrial Development Corporation Vs. Dosu Aardeshir Bhiwandiwala, this Court had observed that: “30. The Court while exercising its jurisdiction under Article 226 is duty-bound to consider whether: (a) adjudication of writ petition involves any complex and disputed questions of facts and whether they can be satisfactorily resolved; (b) the petition reveals all material facts; (c) the petitioner has any alternative or effective remedy for the resolution of the dispute; (d) person invoking the jurisdiction is guilty of unexplained delay and laches; (e) ex facie barred by any laws of limitation; (f) grant of relief is against public policy or barred by any valid law; and host of other factors.” 25. In the instant case, apart from the fact that admittedly certain disputed questions of fact viz. non-receipt of notice under Section 13(2) of the Act, non-communication of the order of the Chief Judicial Magistrate etc. are involved, an efficacious statutory remedy of appeal under Section 17 of the Act was available to the appellants, who ultimately availed of the same. Therefore, having regard to the facts obtaining in the case, the High Court was fully justified in declining to exercise its jurisdiction under Articles 226 and 227 of the Constitution.” 9. Accordingly, the present writ petition is dismissed in limine with the above observations, in the above facts and circumstances of the case.