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2015 DIGILAW 520 (UTT)

Sudha Sharma v. Punjab National Bank

2015-11-03

U.C.DHYANI

body2015
JUDGMENT : U.C. Dhyani, J. By means of the present writ petition, the petitioners seek the following reliefs, among others: (i) Issue a writ, order or direction in the nature of certiorari quashing the impugned possession notice dated 01.05.2015 issued by respondent no.3 to M/s Shring Construction Co. Pvt. Ltd. (Annexure No. 7 to this writ petition). (ii) Issue a writ, order or direction in the nature of mandamus commanding the respondent nos. 1 to 3 not to interfere in peaceful possession of the petitioners over the properties in question. 2. It is the submission of learned counsel for the petitioners that since the petitioners are bona fide purchasers for value, therefore, the auction is illegal in view of Section 41 of the Transfer of Property Act, 1882, which is enumerated herein below for convenience: “41. Transfer by ostensible owner.- Where, with the consent, express or implied, of the persons interested in immovable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make it: PROVIDED that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith.” 3. It is also the submission of learned counsel for the petitioners that the petitioners have taken every reasonable care to ascertain that the transferor had power to make the transfer in good faith. 4. Learned Senior Counsel appearing for the respondents no. 2 & 3, on the other hand, submits that the aforesaid provision is valid only for a specific performance of contract, and not otherwise. 5. Learned counsel for the petitioners further submitted that Section 125 of the Companies Act, 1956 has not been complied with, and, therefore, every charge created by a company, so far as any security on the company’s property or undertaking is conferred thereby, be void against the liquidator and any creditor of the company. 6. Learned Senior Counsel for the respondents no. 2 & 3, on the other hand, submitted that the said provision will apply only when the company is under liquidation and further, the said plea has not been taken by the petitioners in the writ petition. 7. 6. Learned Senior Counsel for the respondents no. 2 & 3, on the other hand, submitted that the said provision will apply only when the company is under liquidation and further, the said plea has not been taken by the petitioners in the writ petition. 7. Learned counsel for the petitioners also submitted that the petitioners had no reason to believe that the property was mortgaged and, therefore, they purchased it. It is further contended that nowhere it was mentioned, either in the revenue records or otherwise, that the said property was mortgaged in favour of the respondents/bank. 8. Learned Senior Counsel replied that there is no provision in law for getting the mortgage recorded in any of the revenue papers. Exception may, however, be taken to Section 6 of the Uttarakhand Agricultural Credit Act, 1973. 9. In the instant case, a notice under Section 2 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) was issued by Punjab National Bank, Race Course, Dehradun (respondent no. 4), to M/s Shring Construction Co. Ltd. D-245, Nehru Colony, Dehradun (respondent no. 4) in respect of the property mentioned in the notice. Respondent no. 4 preferred a Writ Petition being WPMS No. 918 of 2015 before this Court. The following Order was passed in the said writ petition: “Learned counsel for the petitioners submits that petitioners’ account was declared NPA without following the guidelines of Reserve Bank of India. He further contends that petitioners have submitted representations under Section 13 (3A) of the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act, copy of which are available on record being annexure Nos. 2, 3 and 4 of the writ petitioner, and straightway without deciding the representations, notice, under sub-section 4 of the Section 13 of the Act has been issued. Petitioners shall deposit Rs. 1 crore with the Bank within two weeks from today to show his bonafide.” 9. The respondent no. 4 was directed to deposit Rs. 1 crore with the Bank to show his bona fide, but the respondent no. 4 failed to do so. Consequently, the writ petition filed by respondent no. 4 was dismissed. Before filing the writ petition, the respondent no. 4 wrote a letter (annexure-6) on 29.01.2015 with a request to withdraw the notice under Section 13 (2) of the SARFAESI Act. 1 crore with the Bank to show his bona fide, but the respondent no. 4 failed to do so. Consequently, the writ petition filed by respondent no. 4 was dismissed. Before filing the writ petition, the respondent no. 4 wrote a letter (annexure-6) on 29.01.2015 with a request to withdraw the notice under Section 13 (2) of the SARFAESI Act. Statement of amounts deposited in Punjab National Bank realized from the sale of properties which were not released by the Bank, has been annexed along with annexure-6. 10. Annexure-7 is a copy of possession notice, which shows, among other things, that the borrower/guarantor/promoter/mortgagor having failed to repay the amount, was given the notice (to such borrower/guarantor/promoter/mortgagor) and the public in general that the Bank has taken possession of the properties described therein in exercise of powers conferred on it under Section 13 (4) of the said Act read with Rule 8 of the said Rules on 01.05.2015. The borrower/guarantor/promoter/mortgagor in particular and the public in general were cautioned not to deal with the properties and any person dealing with the property will be subject to the charge of the Punjab National Bank, Race Course, Dehradun for the amount of Rs. 15,04,66,677/- (Fifteen crore four lac sixty six thousand six hundred seventy seven only) as on 01.01.2015 along with further interest. 11. Section 13 of the SARFAESI Act provides for enforcement of security interest. Sub-sections (i), (ii) and (iv) of Section 13 of the Act are reproduced herein below to understand the scheme of the Act, as to how the security interest shall be enforced: 13. Enforcement of security interest.- (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act,1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act. Enforcement of security interest.- (1) Notwithstanding anything contained in section 69 or section 69A of the Transfer of Property Act,1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of court or tribunal, by such creditor in accordance with the provisions of this Act. (2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under subsection (4). (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. (3) The notice referred to in sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower. [(3A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower: PROVIDED that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under section 17 or the Court of District Judge under section 17A.] (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) take over 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 for 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. 12. The aforesaid provision is not dependant on any other provision of law. It is, in a way, complete Code in itself to enforce security interest. 13. Thus, this Court is inclined to hold that neither Section 41 of the Transfer of Property Act, 1882, nor Section 125 of the Companies Act, 1956 are applicable to the facts of the instant case, due to the reasons assigned by learned Senior Counsel for the respondents no. 2 & 3, a description of which has been given in one of the above mentioned paragraphs of this judgment. 14. The petitioners have an alternative remedy to file the appeal before the Debts Recovery Tribunal, as has been mentioned under Section 17 of SARFAESI Act. The said provision is being reproduced herein below for convenience: 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 alongwith 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 measure had been taken: [PROVIDED that different fees may be prescribed for making the application by the borrower and the person other than the borrower.] [Explanation : For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of Section 17.] (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 business 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 creditors as invalid and restore the possession of the secured assets to the borrower or restore the management of the business 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 recourse 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 the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the rules made thereunder. 15. Entire mechanism of appeal has been provided herein above. 16. It was, therefore, proper on the part of the writ petitioners to have taken recourse to the provisions of Appeal before the Debts Recovery Tribunal under Section 17 of the Act. The Writ Petition is devoid of merits. The same is, therefore, dismissed with liberty to the petitioners to avail the remedy of Appeal before the Debts Recovery Tribunal. 17. It is provided that if an appeal is filed by the petitioners before the Debts Recovery Tribunal, the DRT shall decide the Appeal in accordance with law, but without being prejudiced by any of the observations made by this Court in the body of this judgment.