DIMENSION REALTORS PRIVATE LIMITED v. DISTRICT MAGISTRATE, NORTH 24 PARGANAS
2015-09-23
SANJIB BANERJEE
body2015
DigiLaw.ai
JUDGMENT : SANJIB BANERJEE, J. After the statute has baffled many a court to express divergent views, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act in its amended form in Section 14 thereof falls for consideration. 2. The immediate grievance of the petitioners is in the District Magistrate, North 24-Parganas having passed an order on May 29, 2015 by which the district superintendent of police has been requested “to provide police assistance to the secured creditors for taking possession of the secured assets …” The schedule of assets is appended to the order of the District Magistrate of May 29, 2015. 3. The secured creditor, the second respondent herein, issued a notice to the first petitioner under Section 13(2) of the said Act of 2002 for the alleged failure of the first petitioner to repay a debt due of about Rs.11 crore. Such notice was issued on November 27, 2014, to which the first petitioner replied on January 19, 2015. The grounds cited by the first petitioner were rejected by the secured creditor’s letter of February 23, 2015. The petitioners say that in apprehension of the measures that the secured creditor may resort to upon dismissing the first petitioner’s reply to the notice under Section 13(2) of the said Act of 2002, the first petitioner instituted a suit in the Barasat court having jurisdiction over the secured asset against, inter alia, the secured creditor, seeking a decree for specific performance of the agreement by which the owner of the secured asset had promised to sell an identified space at the Axis Mall in Rajarhat to the first petitioner. The first defendant in such suit is the fourth respondent herein as the owner of Axis Mall. The present lessee of the space is another defendant to the Barasat suit. The petitioners claim that against a loan of about Rs.10 crore obtained by the first petitioner from the secured creditor, a sum of about Rs.11 crore has been repaid.
The first defendant in such suit is the fourth respondent herein as the owner of Axis Mall. The present lessee of the space is another defendant to the Barasat suit. The petitioners claim that against a loan of about Rs.10 crore obtained by the first petitioner from the secured creditor, a sum of about Rs.11 crore has been repaid. The more substantial ground urged by the petitioners, relevant for the present context, is that the order impugned is without jurisdiction, inter alia, as the nature of the order passed is not one contemplated under Section 14 of the said Act of 2002 and that the District Magistrate failed to exercise a duty imposed on him by the statute in such official not inviting the first petitioner to a hearing or indicating in the impugned order that he was satisfied that the conditions precedent to the exercise of authority under such provision had been complied with. 4. In support of the petitioners’ case, a judgment reported at (2014) 6 SCC 1 (Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited) is cited for the apparent recognition therein that upon receipt of a written request under Section 14 of the said Act, the chief metropolitan magistrate or district magistrate is obliged to conduct a full-fledged hearing on the merits of the secured creditor’s claim upon notice to the borrower or any other person interested in the secured asset. The petitioners also rely on another recent judgment of the Supreme Court reported at (2013) 9 SCC 620 (Standard Chartered Bank v. V. Noble Kumar) wherein it has been observed that a person interested in a secured asset has no right to apply under Section 17 of the said Act of 2002 before a Debts Recovery Tribunal prior to being dispossessed from the secured asset. The petitioners contend that in view of such judgments, the impugned order could not have been passed without notice to the first petitioner and without hearing it. 5. The petitioners claim that, in any view of the matter, there cannot be any doubt that a person affected or immediately likely to be affected by any measure taken by a secured creditor under Section 13(4) of the said Act has to be afforded a forum to seek redressal of the perceived wrong.
5. The petitioners claim that, in any view of the matter, there cannot be any doubt that a person affected or immediately likely to be affected by any measure taken by a secured creditor under Section 13(4) of the said Act has to be afforded a forum to seek redressal of the perceived wrong. The petitioners insist that in Section 14 of the said Act not expressly prohibiting a hearing before the chief metropolitan magistrate or the district magistrate thereunder and in the 2013 Amendment to the said Act incorporating the pointed items of adjudication in course of the Section 14 proceedings, a person likely to be adversely affected by any order that may be made by the appropriate official under Section 14 of the said Act has to be given notice and heard before any order to his prejudice or detriment may be made under such provision. The petitioners claim that though a recent judgment of this court has not followed the dictum in Harshad Govardhan Sondagar on its understanding that Harshad Govardhan Sondagar is not in consonance with previous judgments of the Supreme Court not noticed therein, when there is an issue as to the existence of the security or the validity of the security agreement, the rule as laid down in Harshad Govardhan Sondagar is binding as the previous cases of the Supreme Court apparently not noticed in Harshad Govardhan Sondagar did not deal with such aspect of the matter. 6. It is in such context, despite the recent comprehensive pronouncement by this court in a yet unreported judgment of August 6, 2015 in a batch of writ petitions led by WP No. 11828 (W) of 2015 (Jawahar Singh v. The United Bank of India), that the matter has to be assessed in some detail since some of the grounds urged by the petitioners herein in support of their case were, according to the petitioners, not canvassed in course of Jawahar Singh and not noticed in such judgment. 7. The petitioners have also referred to several other judgments, including those reported at (2011) 2 SCC 782 (Kanaiyalal Lalchand Sachdev v. State of Maharashtra) and (2010) 8 SCC 110 (United Bank of India v. Satyawati Tondon), which, according to Jawahar Singh, effectively rendered Harshad Govardhan Sondagar per incuiriam.
7. The petitioners have also referred to several other judgments, including those reported at (2011) 2 SCC 782 (Kanaiyalal Lalchand Sachdev v. State of Maharashtra) and (2010) 8 SCC 110 (United Bank of India v. Satyawati Tondon), which, according to Jawahar Singh, effectively rendered Harshad Govardhan Sondagar per incuiriam. To be fair to the petitioners, they have willy-nilly traced the history of the statute as it has traversed through the highest court of this country and received attention from the challenge to its vires to its operational efficacy in diverse comparable situations. 8. According to the petitioners, the direction issued by the District Magistrate in the impugned order of May 29, 2015 is contrary to the authority available to such official under sub-sections (1A) and (2) of Section 14 of the said Act. The petitioners say that, in any event, the order does not disclose that the nine conditions introduced by way of the 2013 Amendment as the first proviso to Section 14(1) of the said Act had been complied with or that the District Magistrate had been satisfied by the contents of any affidavit that may have been filed by the secured creditor before him covering the nine aspects. The petitioners suggest that since Section 14 lets the might of the State loose on a secured asset which neither the borrower nor any other person interested in the secured asset may be capable of resisting, it is necessary that the exercise of the authority under such provision be strictly in terms thereof and not otherwise. As a corollary, the petitioners submit that the draconian outcome of an order under Section 14 of the said Act should prompt a court to read the principles of natural justice into such provision. At any rate, the petitioners assert that nothing in Section 14 excludes the operation of the principles of natural justice, whether specifically or by necessary implication. The petitioners insist that the introduction of the nine clauses by the 2013 Amendment and the use of the expression “after satisfying the contents of the affidavit pass suitable orders” in the second proviso to Section 14(1) of the said Act necessarily makes the exercise under Section 14 an adjudicatory process which will involve a hearing for a meaningful assessment of the contents of the affidavit that the secured creditor is required to file under the first proviso to sub-section (1) of that provision.
9. The petitioners say that it is possible for an immovable property let out to another to be offered as a security by the owner thereof in connection with credit facilities obtained by the owner or any other. The petitioners suggest that it is equally permissible, under Section 65-A of the Transfer of Property Act, 1882, that, subject to the conditions recognised in such provision, a mortgaged property may be leased to another with the lessee being entitled to meaningfully enjoy the leasehold property and the incidents of the lease without fear of immediate dispossession by the secured creditor. The petitioners claim that in the instant case when there is no existence of any secured asset and the rights of the first petitioner therein are inchoate, it was incumbent on the District Magistrate to look into the facts asserted by the secured creditor before obliging the secured creditor with an illegal order of police assistance. 10. The petitioners refer to Section 31(e) of the said Act of 2002 that makes the provisions of the statute inapplicable, inter alia, to a lease. The petitioners submit that every right in an immovable property is not capable of forming a security interest and cannot, in every case, be regarded as a security interest for the purposes of the said Act. According to the petitioners, the first petitioner has made a substantial payment for purchasing the agreed space at Axis Mall, but the first petitioner cannot be said to be the owner of such immovable property so as to be able to create security interest in respect thereof in favour of the secured creditor. The petitioners say that the secured creditor may have been satisfied with the security furnished by the first petitioner when obtaining the credit facilities, but the first petitioner was constrained to offer such security as was demanded by the secured creditor, though no security interest could legally have been created in respect of the imperfect rights of the first petitioner over the identified space at the Axis Mall. 11. Before borrowing thoughts from other judgments, even though almost all of those cited by the petitioners bind this Bench, it is necessary to appreciate the purpose of the said Act of 2002, its fabric and its manner of operation to the extent relevant for the present purpose.
11. Before borrowing thoughts from other judgments, even though almost all of those cited by the petitioners bind this Bench, it is necessary to appreciate the purpose of the said Act of 2002, its fabric and its manner of operation to the extent relevant for the present purpose. The said Act of 2002 is the follow-up legislation to the Recovery of Debts due to Banks and Financial Institutions Act, 1993 which was found to be not capable of dealing with the problem that such messiah statute was introduced to tackle. To cut a long story short and not recount the history that led to the 1993 Act and the said Act of 2002, it may do well to acknowledge that the powers that be considered that the sovereign system of courts was not competent enough to deal with bank claims with the alacrity and the efficacy that they demanded; as a consequence whereof, the capital of the State (the country was still in the pre-liberalised days when the Debt Recovery Ordinance was introduced) remained blocked and unavailable for further distribution or circulation. One committee after another suggested that the matters had to be taken outside the purview of the court system and so the panacea arrived in the form, first of the Ordinance and then the said Act of 1993. But the presiding officers of the Debts Recovery Tribunal, uncorrupted as they were in legal niceties, could not deliver as may have been expected and it was felt necessary to give the secured creditors direct access to their securities without the manifold procedural requirements like in Order XXXIV of the Code of Civil Procedure, 1908. After all, there was, to a limited extent, the experience of similar provisions in respect of the State financial corporations under the State Financial Corporations Act, 1951. The like entitlement as in the 1951 Act was extended to secured creditors as defined and notified under the Act of 2002 to proceed directly against the secured assets upon a loan account becoming non-performing. 12. In a sense, the Act of 2002 goes against the grain of the rule of law to which this constitutional democracy is wedded. Ordinarily, a process of adjudication precedes a process of execution.
12. In a sense, the Act of 2002 goes against the grain of the rule of law to which this constitutional democracy is wedded. Ordinarily, a process of adjudication precedes a process of execution. The said Act of 2002 allows the secured asset to be taken possession of and an ex post facto adjudication of the dues and the propriety of the action taken by the secured creditor; though it may not follow that inevitably actual physical possession of the secured asset must be taken over by the secured creditor before the process of adjudication may commence. The issue is whether in every case, a person likely to be affected by the measures initiated by the secured creditor under Section 13(4) of the Act has to be a mere bystander and he may complain of the illegality thereof only after the accomplishment of the measure by the secured creditor. 13. The said Act of 2002 does not go to such extent as to confer power on secured creditors or their authorised representatives to do whatever may be within their might to take possession of or protect the secured assets as defined by the statute. The first aspect of Section 14 that must be noticed is that it is there in the statute so that a secured creditor or its authorised officer may not resort to force or any unsavoury means to obtain possession of a secured asset. The element of civility that the said Act of 2002 demands of secured creditors is that they would approach the State for the State to lend its coercive authority to secure the possession of a secured asset from a recalcitrant borrower or any other person resisting the same. Whatever else Section 14 of the said Act mandates, it must first be seen to obviate the resorting to force or other disagreeable means by secured creditors to procure the secured assets under the said Act. 14. The said Act of 2002 has undergone a sea-change, particularly those provisions thereof that have to do with the manner of assistance that may be obtained by the secured creditors to take possession of the secured assets and matters pertaining to adjudication under the Act.
14. The said Act of 2002 has undergone a sea-change, particularly those provisions thereof that have to do with the manner of assistance that may be obtained by the secured creditors to take possession of the secured assets and matters pertaining to adjudication under the Act. The Security Interest (Enforcement) Rules, 2002, framed under the rule-making authority of the Central government under Section 38 of the said Act of 2002, have ostensibly been fine-tuned in keeping with the changes introduced in the statute. But as experience shows in several other cases, when piecemeal surgery is performed on a statute or its attendant rules, the persona of the statute is left in a confused state. So has it been in the case of the said Act of 2002 and the rules thereunder by virtue of the several amendments thereto. 15. The challenge to the vires of the said Act of 2002 in several High Courts reached the Supreme Court and culminated in a judgment of a Bench strength of three reported at (2004) 4 SCC 311 (Mardia Chemicals Limited v. Union of India). Both the petitioners and the secured creditor respondent have placed copiously from such judgment and another reported at (2008) 1 SCC 125 (Transcore v. Union of India) that deal with several fundamental aspects of the said Act of 2002 in the forms that such statute existed at the relevant times. Both judgments will be referred to hereafter in greater detail, but it must be first noticed that Section 14 of the said Act of 2002 as it now stands did not fall for consideration in either case. 16. A further caveat must be entered before delving into a detailed discussion on amended Section 14 of the said Act of 2002. It is, generally, impossible – and, certainly, always impermissible – to notice the scope and manner of operation of a particular provision of a statute in isolation. A provision in an enactment has to be viewed in the context of the company that it keeps and its interpretation has, per force, to be in its interplay with the other provisions of the statute in the backdrop of the objectives of the legislation or the rights that it seeks to further or the mischief that it intends to arrest. 17.
17. In the context of a threadbare assessment of Section 14 of the said Act of 2002, in the light of the facts obtaining in the present case, Sections 13 and 17 of the said Act of 2002 need always to be kept in mind; for the three are linked and the rights of the persons governed or affected thereby have to be viewed accordingly. 18. To the extent as is necessary in the milieu of the present facts, it may be noticed that the said Act of 2002 in its original form permitted a secured creditor to issue a notice in writing to a borrower whose secured debt had become a non-performing asset, as defined in Section 2(1)(o) of the Act, to discharge in full the liability to the secured creditor within 60 days of the date of the notice. If, upon receipt of such notice under Section 13(2) of the Act in its original form, the borrower (which term is defined in the Act to cover both the principal debtor and the guarantor) failed to comply with the demand contained therein, the secured creditor had the authority to take recourse to one or more of the measures identified in the four clauses of Section 13(4) of the Act. Following the dictum in Mardia Chemicals Limited (the setting in which it was rendered will be noticed later), a further sub-section – (3A) - was introduced after Section 13(3) in the said Act together with other sub-sections and corresponding or independent changes were made in several other provisions. The corresponding change, to the extent relevant for the present discussion, which was effected in Section 17 of the Act was, again, as a direct fallout of the observations and findings in Mardia Chemicals Limited. The triumvirate of Sections 13, 14 and 17 of the said Act that requires to be seen in unison developed a personality change by virtue of the Amending Act of 2004, though Section 14 of the Act remained untouched by the general upheaval in the statute by such initial amendment. 19. The 2004 Amendment afforded the borrower a chance to reply to the secured creditor’s notice under Section 13(2) of the Act and put forth the borrower’s contentions for the consideration thereof by the secured creditor.
19. The 2004 Amendment afforded the borrower a chance to reply to the secured creditor’s notice under Section 13(2) of the Act and put forth the borrower’s contentions for the consideration thereof by the secured creditor. The proviso to added sub-section (3A) of Section 13 of the Act clarified that the reasons communicated by a secured creditor to the borrower under such provision, or the likely action of the secured creditor discernible from the nature of its response to the borrower’s argument, would not be immediately justiciable. As a corollary, an explanation was introduced in Section 17(1) of the Act to emphasise that the rejection of the borrower’s justification under Section 13(3A) of the Act or the consequential apprehended action by the secured creditor could not, by itself, be the foundation for a grievance being carried to the appropriate Debts Recovery Tribunal (DRT or the tribunal) under Section 17(1) of the Act. The explanation to Section 17(1) of the Act may have a larger bearing on the primary issue that has been raised herein. 20. There were other changes that the 2004 Amendment brought in Section 17 of the Act that are also germane for the present assessment. For the moment, it may suffice to notice that a distinction between a borrower and any other person aggrieved, within the meaning of the expression “Any person (including borrower) aggrieved” in Section 17(1) of the Act, was statutorily recognised. The secured creditor respondent herein has laid much stress on such aspect of the distinction in its attempt to highlight that since it is the borrower which is the principal petitioner herein, such statutory distinction would not only not further the petitioning borrower’s case but also render the petitioning borrower’s grievance to not be justiciable at this stage. 21. An important statutory clarification was made in the body of the substantive right conferred by Section 17(1) of the Act by replacing the expression, “may prefer an appeal”, by the expression, “may make an application along with such fee, as may be prescribed”. This seemingly innocuous tweaking of words resulted in the first of several glaring anomalies in the Act, some of which, as relevant herein, are noticed later.
This seemingly innocuous tweaking of words resulted in the first of several glaring anomalies in the Act, some of which, as relevant herein, are noticed later. Section 17 of the Act is intituled “Right to appeal” and so did the body of Section 17(1) in its original form describe the right of a borrower and others aggrieved, within the meaning of the relevant expression, thereunder. But a right to appeal is, jurisprudentially, a right to approach a superior forum from the order passed at the culmination of an adjudicatory process. An adjudicatory process, ordinarily, implies an assessment of the rights of the parties to the process of adjudication based on a set of facts as established in the backdrop of the law as applicable. Customarily, such a process involves the assertion of a right by one and the denial by the other in its most simplistic form involving only two parties, which the judicial or quasi-judicial authority presiding over the forum adjudicating the resultant dispute would decide to the extent necessary for the purpose of the adjudication and as permissible by the jurisdiction of such forum. Since the very ethos of the said Act of 2002 from its inception is to allow secured creditors the right to obtain the secured assets without suffering through a process of adjudication, the description of the right conferred by Section 17(1) of the Act was flawed, both in its heading or marginal note and in the body thereof and continues in its erroneous caption. The anomaly has prompted several judicial pronouncements to casually regard the right conferred by section 17(1) of the Act as a right of appeal, though the issue is no longer res integra in view of the dictum in Mardia Chemicals Limited and the subsequent replacement of the word, “appeal”, by the word, “application”, in the provision. That the heading of relevant section retains its original mistake, though it is of no legal consequence, is one of several aberrations that have been thrown up by the amendments to the said Act of 2002. 22. Section 17 of the Act in its original form was perceived to be so harsh in its operation that the right conferred thereunder to any aggrieved person other than a borrower was seen to be illusory.
22. Section 17 of the Act in its original form was perceived to be so harsh in its operation that the right conferred thereunder to any aggrieved person other than a borrower was seen to be illusory. The two essential features that the judgment in Mardia Chemicals Limited focused on were: the absence of a right to a borrower to respond to a demand under Section 13(2) of the said Act; and, the oppressive requirement of a pre-deposit of 75 per cent of the amount claimed in the notice under Section 13(2) of the Act as a condition precedent to a person invoking Section 17(1) of the Act. It must be said in the same breath, however, that though Section 17(1) of the Act in its original form permitted persons other than borrowers to apply thereunder, Section 17(2) of the Act in its original form required the deposit to be made by borrowers without specifically spelling out that the same condition had also to be met by aggrieved non-borrowers invoking the provision. Thus, the concept of a pre-deposit in original Section 17 of the Act came to be replaced in its amended form by the concept of fees with the proviso specifically spelling out the permissibility in the differentiation of fees between different classes of borrowers and differentiation in the fees chargeable from borrowers as those from non-borrowers. 23. Of the relevant provisions of the Act, Section 17 thereof underwent the most comprehensive change by the Amending Act of 2004. Indeed, several of the alterations introduced by the 2004 Amendment dated back to June 21, 2002 when the said Act of 2002 came into force and several others had retrospective operation from November 11, 2004. New sub-section (2) of Section 17 of the Act charted out the contours of the authority of the tribunal in seisin of an application under Section 17(1) of the Act in its words, “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.” Then came new sub-section (3) of Section 17 that throws up another anomaly and new sub-section (4) that presents a further riddle in its operation. The other modifications to Section 17 of the Act may not be of much relevance herein. 24.
The other modifications to Section 17 of the Act may not be of much relevance herein. 24. The exact issue that falls for consideration in the present proceedings is whether the grievance carried by the petitioning borrower ought, in the light of the facts, to be received in this jurisdiction. The question hinges on the permissibility of entertaining the immediate complaint on merits, rather than the exercise of discretion in this extraordinary jurisdiction where there is always a greater degree of subjectivity involved. The broader canvas for the assessment covers the rights of a person aggrieved by any measure taken by a secured creditor under Section 13(4) of the Act, the appropriate stage for the assertion of such rights, the manner in which it may be done and the considerations that should weigh in the adjudication upon the grievance being appropriately lodged. The discussion necessarily involves much of an insight into Sections 13, 14 and 17 of the Act as they operate together, limited to the matter in issue which is covered by the measures taken under Section 13(4)(a) thereof. A lot may turn on the implication of the key words in Section 17(1) of the Act, “measures … taken”, in the phrase, “aggrieved by any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor”, and in its juxtaposition to the cognate expression, “the secured creditor may take recourse to one or more of the following measures to recover his secured debt”, in Section 13(4) thereof. 25. Since the focus of this discussion is Section 14 of the Act, as the order impugned herein has been made thereunder, it is such provision that needs to be seen first, along with the changes brought therein by the 2013 Amendment to the said Act of 2002. The substantive provision of that section, as encapsulated in original sub-section (1) thereof, remains unaltered in its present avatar. The amendment has only given a different dimension to the operation of the substantive provision in the addition incorporated in sub-section (1) thereof and has permitted the delegation of the actual work under the substantive provision to a subordinate officer by the introduction of sub-section (1A) into Section 14. The other change in the section, as introduced by the addition of certain words in pre-existing sub-section (3) thereof, is a consequence of the introduction of subsection (1A) in the provision.
The other change in the section, as introduced by the addition of certain words in pre-existing sub-section (3) thereof, is a consequence of the introduction of subsection (1A) in the provision. The nature of the process involved under Section 14 of the Act has been held in Harshad Govardhan Sondagar, at least in the context of strangers to the transaction between a secured creditor and the borrower, or, in other words, the non-borrowers, to be adjudicatory. Again, the judgment in Harshad Govardhan Sondagar, just as the observation in such regard in V. Noble Kumar, was rendered on a factual position not governed by the amendment to Section 14 of the Act. The petitioners contend that the chief metropolitan magistrate or the district magistrate can pass an order on a secured creditor’s request under Section 14 of the Act after conducting an adjudication since, according to the petitioners, such officer has to satisfy himself as to the existence of the nine conditions covered by the first proviso to Section 14(1) of the Act introduced by the 2013 Amendment. The petitioners suggest thus on the basis of the expression, “after satisfying the contents of the affidavit pass suitable orders” in the second proviso to the sub-section brought in by the 2013 Amendment. The petitioners say that in view of new sub-section (1A) as introduced by the 2013 Amendment, the process of adjudication as required by modified Section 14(1) of the Act must be completed and an order pronounced thereon by the concerned chief metropolitan magistrate or district magistrate; though the physical act of making over possession of the secured asset and the like may be delegated to a subordinate officer. 26. The entirety of Section 14 of the Act needs to be looked at in view of the petitioners attributing a process of adjudication being undertaken thereunder by reason of the 2013 Amendment: “14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.
26. The entirety of Section 14 of the Act needs to be looked at in view of the petitioners attributing a process of adjudication being undertaken thereunder by reason of the 2013 Amendment: “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: Provided that any application by the secured creditor shall be accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor, declaring that – (i) the aggregate amount of financial assistance granted and the total claim of the Bank as on the date of filing the application; (ii) the borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period; (iii) the borrower has created security interest over various properties giving the details of properties referred to in subclause (ii) above; (iv) the borrower has committed default in repayment of the financial assistance granted aggregating the specified amount; (v) consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non-performing asset; (vi) affirming that the period of sixty days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower; (vii) the objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non-acceptance of such objection or representation had been communicated to the borrower; (viii) the borrower has not made any repayment of the financial assistance is spite of the above notice and the Authorised Officer is, therefore, entitled to take possession of the secured assets under the provisions of sub-section (4) of section 13 read with section 14 of the principal Act; (ix) that the provisions of this Act and the rules made thereunder had been complied with: Provided further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured assets: Provided also that the requirement of filing affidavit stated in the first proviso shall not apply to proceeding pending before any District Magistrate or the Chief Metropolitan Magistrate, as the case may be, on the date of commencement of this Act.
(1A) The District Magistrate or the Chief Metropolitan Magistrate may authorise any officer subordinate to him, - (i) to take possession of such assets and documents relating thereto; and (ii) to 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 (sic, or) any officer authorised by the Chief Metropolitan Magistrate or District Magistrate done in pursuance of this section shall be called in question in any court or before any authority.” (The italicised portions not in bold are those that have been incorporated by the 2013 Amendment) 27. The departure that the said Act of 2002 makes from the conventional jurisprudence that generally governs the rights of property in this country is found in Section 13(1) thereof. Ordinarily, except in cases of immediate acquisition of property for a public purpose, the rights of a person, titular or possessory, in respect of any immovable property may not be disturbed without his consent before an adjudication under a procedure established by law is concluded. By virtue of Section 69 of the Transfer Property Act, a mortgagee cannot pounce upon the mortgaged property without taking recourse to a court of law. In these days of tribunalisation and outsourcing of the core activity of that limb of the sovereign that goes by the name of judiciary, it may be more appropriate to use the word “court” in the same breath as a judicial or quasi-judicial authority. But that digression apart, the general law of the land, prior to the said Act of 2002 (the other broad exception being under the State Financial Corporations Act, 1951), did not permit a mortgagee to sell the mortgaged property without undergoing a process of adjudication. Those were the days where simple words as mortgage or mortgagor or mortgagee sufficed and the convoluted lexicon, with the confused baggage that they bring, as in “secured asset”, “security interest” and the like, were undiscovered species. 28.
Those were the days where simple words as mortgage or mortgagor or mortgagee sufficed and the convoluted lexicon, with the confused baggage that they bring, as in “secured asset”, “security interest” and the like, were undiscovered species. 28. It is the essential feature of the said Act of 2002 as captured in Section 13(1) thereof that makes it possible in some cases for secured creditors covered by the statute to, in a manner of speaking, resort to execution without obtaining a decree with the adjudication that would culminate in a decree being undertaken ex post facto. In the context in which Mardia Chemicals Limited came to be pronounced, it recognised the said Act of 2002 as such and, to such extent, V. Noble Kumar repeats the same. The broad answer, therefore, to the petitioners’ argument fashioned on the 2013 Amendment to Section 14 of the Act is that such amendment cannot be seen to have destroyed the very philosophy of the statute. Without yet getting into the finer details which give a more complete answer to the legal question that has arisen herein, it may also be appreciated that even in the modern mantra of tribunalisation as a remedy for the evils of a resource-starved judiciary, however grudgingly it may be accepted that certain core functions of the judiciary may be parked with quasi-judicial authorities, it may still be too much to swallow that the business of adjudication can also be outsourced to executive functionaries like a district magistrate (though such official may otherwise enjoy certain quasi-judicial authority). 29. The more definitive answer to the primary legal issue is in the analysis and appreciation of the said Act of 2002 and the interplay of Sections 13, 14 and 17 thereof as applicable to a situation as the present one in respect of a measure taken, or in the process of being taken, under Section 13(4)(a) thereof. In view of the embargo on the power of sale of the mortgaged property under Section 69 of the Transfer of Property Act and the similar restriction to appoint a receiver under Section 69-A thereof being undone by Section 13(1) of the said Act of 2002 in respect of secured creditors covered thereby, a secured creditor under the Act of 2002 is empowered to take possession of the secured asset without the leave or permission of any authority.
Section 13(4) of the Act of 2002 ordains thus, though, there is an obvious anomaly as to when the secured creditor may exercise such right as the amendment that brought in sub-section (3A) into Section 13 did not make the corresponding change to the expression, “period specified in sub-section (2)”, in sub-section (4) thereof. It is necessary to dwell on the anomaly since the Act of 2002 in its present form is riddled with several internal incongruities. Section 13(2) of the Act in its original form permitted 60 days from the date of the notice to a borrower in receipt of a notice thereunder to comply with the demand. Section 13(3), which remains unaltered, pertains to the contents of the notice. The failure by the borrower to comply with the demand contained in the notice entitled a secured creditor, in the original form of the statute, to proceed under Section 13(4) thereof. The introduction of an element of natural justice in the provision, following the Mardia Chemicals Limited judgment, by way of Section 13(3A), now gives a borrower an opportunity to make a representation or raise an objection to the notice received by the borrower under Section 13(2) of the Act and 15 days from the receipt of such representation or objection for the secured creditor to communicate the reasons for non-acceptance, if any, thereof. The amendment, however, did not make the appropriate correction of time in Section 13(4) of the Act. Since there is a time-limit indicated in Section 13(2) of the Act, a borrower in receipt of a notice thereunder may make a representation or raise an objection in respect of such notice even on the 60th day of the date of the notice. The secured creditor has a further 15 days to respond to the representation or objection. It cannot be said that notwithstanding the introduction of sub-section (3A) to Section 13 of the Act, a secured creditor may proceed after the expiry of 60 days from the date of the notice (which is the period specified in Section 13(2) of the Act as recognised in Section 13(4) thereof) without considering the borrower’s objection or representation that may have been legitimately served on the secured creditor. So much for such anomaly, which is one in a litany of inconsistencies in the said Act of 2002. 30.
So much for such anomaly, which is one in a litany of inconsistencies in the said Act of 2002. 30. To return to the core provision of Section 13(4) of the Act, limited as the present discussion must be to clause (a) thereof, such provision is set out: “13. Enforcement of security interest. – (1) … (2) … (3)… (3A)… … (4) In case the borrower fails to discharge his liability in full withinthe 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 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.” 31. It is here that the relevant provisions of the said Rules of 2002 framed under the said Act of 2002 need to be seen insofar as they throw some light on how the provisions of the Act may be carried out in the context of a situation governed by Section 13(4)(a) of the Act.
It is here that the relevant provisions of the said Rules of 2002 framed under the said Act of 2002 need to be seen insofar as they throw some light on how the provisions of the Act may be carried out in the context of a situation governed by Section 13(4)(a) of the Act. The said Rules of 2002 cover matters such as the manner of service of a notice under Section 13(2) of the Act, how the representation or objection to the notice may be dealt with, the procedure to be followed after the issuance of the notice, the valuation of the secured assets, the procedure for sale of immovable secured assets and the like. Again, there are several anomalies in the said Rules of 2002 qua the said Act of 2002 which are ignored herein. There is a distinction made between movable secured assets and immovable secured assets as evident, inter alia, from Rules 4 and 8 of the said Rules of 2002. Rule 4(1) provides for movable secured assets to be taken possession of by the authorised officer of the secured creditor in the presence of two witnesses upon minutes in such regard being drawn, as nearly as possible, as per Appendix I to the said Rules. Rule 8 of the said Rules of 2002 pertains to the sale of immovable secured assets and prescribes that “the authorised officer shall take or cause 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.” Rule 8(2) of the said Rules of 2002 requires the possession notice under Rule 8(1) thereof to “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 …” 32. The next sub-rule is of some significance as it hints at a possible distinction between notional possession of an immovable secured asset taken by a secured creditor and the actual physical possession thereof.
The next sub-rule is of some significance as it hints at a possible distinction between notional possession of an immovable secured asset taken by a secured creditor and the actual physical possession thereof. Unfortunately, there is no sequitur to such distinction in Rule 8(3) of the said Rules as the rest of the sub-rules, which chart out a step by step process, proceed to the effecting of the sale of the secured asset; leaving it unanswered, at least in such provision, as to how a secured creditor would take physical possession of an immovable secured asset. 33. The said Act of 2002 does not give any authority to a secured creditor thereunder, or the authorised officer of any secured creditor, to obtain possession of either a movable secured asset or an immovable secured asset by force. As noticed earlier, it is here that Section 14 of the Act fits in. It may now be profitable to imagine a few situations. Such exercise is relevant even in the present context to comprehend the width and scope of Section 14 of the Act and the authority thereunder; for, it cannot be reasonably said that a particular provision that makes no distinction between classes of persons or situations would operate in one way qua a particular class of persons or in respect of certain situations and quite otherwise qua other classes of persons and other situations. The point is emphasised in view of the dictum in Harshad Govardhan Sondagar and the reading thereof, as to its limited applicability to particular situations, in Jawahar Singh. It may reasonably be inferred that, despite the other legal principles that the said Act of 2002 may have turned on their head, such Act does not empower a secured creditor thereunder to flex its muscles in course of obtaining possession of any secured asset, movable or immovable. There could be three possible situations faced by a secured creditor seeking to take possession of a secured asset: where the possession of the secured asset (movable or immovable) is surrendered by the borrower or any other to the secured creditor; or, where the borrower or any other actively resists the secured creditor or its authorised officer in taking possession of the secured asset (movable or immovable); or, when the borrower or any person in possession of the secured asset (movable or immovable) does neither.
As experience instructs, the business of adjudication requires time – and, possibly, some intellect – since there is a small band of black on one side and a smaller band of white on the other side and it is the immeasurable gray of the chasm in between that necessitates adjudication. It is likewise in the present scenario: there may be very few cases where a law-abiding borrower would make over the secured asset on a platter, so to say, to the secured creditor or its authorised officer. 34. If the rule of law has not yet gone out of fashion, it would follow that in every case where possession of a secured asset (movable or immovable) is not overtly, or by inescapable implication, made over by a borrower or any other person in possession thereof to a secured creditor who claims to be entitled thereto under the said Act of 2002, such secured creditor has no choice but to take recourse to Section 14 of the Act. Despite the access to the secured asset that is given by the said Act of 2002 to a secured creditor covered thereunder, without taking recourse to an adjudicatory process, the secured creditor, who is not handed over possession of the secured asset (movable or immovable) by the borrower or any person in possession thereof, cannot resort to any measure to secure such possession other than to come to the appropriate wing of the sovereign for assistance under Section 14 of the Act. The scheme of Section 13 of the Act, as echoed in Rule 8 of the said Rules of 2002, gives an impression, as observed in V. Noble Kumar, that possession of the secured asset must first be obtained by the secured creditor before the secured creditor can sell the same. In most cases, that may be the appropriate approach, but there are situations where physical possession of the secured asset (almost invariably immovable assets) cannot be legitimately sought by the secured creditor, with or without the assistance under Section 14 of the Act, as the secured creditor may not be entitled thereto. 35. It is not impermissible under any law, least of all the said Act of 2002, for a tenanted property of a borrower to be furnished as security for obtaining credit facilities.
35. It is not impermissible under any law, least of all the said Act of 2002, for a tenanted property of a borrower to be furnished as security for obtaining credit facilities. If such a secured creditor covered by the said Act of 2002 were to proceed against the secured asset, which is the tenanted property, the secured creditor would not be authorised, whether by the said Act of 2002 or otherwise, to throw out the tenants who have been in possession of the property since a time anterior to the creation of the security. In such a situation, the secured creditor cannot obtain physical possession of the secured asset to effect the sale thereof. The interest of the secured creditor in the secured asset in such a case would be in the ownership of the property and not in the possessory right in respect thereof. And it is only such ownership that may be sold to realise the debt and not the usually attendant right of possession that goes with the sale of an immediate property. 36. But notwithstanding the myriad situations that may present themselves, even the worst case scenario for the secured creditor and the unimpeachable rights of those in possession of a secured asset in a particular case, it still cannot be said that Section 14 enjoins on the chief metropolitan magistrate or district magistrate a duty to adjudicate on the rights of the secured creditor who has applied thereunder or the rights of those absentees who may be affected by the steps taken thereunder. It is true that the 2013 Amendment requires an affidavit to be filed before the chief metropolitan magistrate or district magistrate in support of a request made by a secured creditor under Section 14 of the Act. But it does not follow that merely because an affidavit containing certain declarations is required to be placed before the chief metropolitan magistrate or district magistrate under Section 14 of the Act, such official has to ascertain the veracity of the declarations furnished.
But it does not follow that merely because an affidavit containing certain declarations is required to be placed before the chief metropolitan magistrate or district magistrate under Section 14 of the Act, such official has to ascertain the veracity of the declarations furnished. Even the inarticulate expression used in the second proviso to Section 14(1) of the Act introduced by the 2013 Amendment, “after satisfying the contents of the affidavit pass suitable orders”, confines the satisfaction to merely checking that the nine features of the declaration as recognised in the first proviso have been covered in the affidavit; and, definitely, does not call for any modicum of inquiry into the veracity or the justification or the basis of the declaration or any aspect thereof. In other words, as long as the request by the secured creditor under Section 14 of the Act is accompanied by an affidavit duly affirmed by the authorised officer of the secured creditor making a declaration covering the nine aspects, the chief metropolitan magistrate or district magistrate has due authority to pass suitable orders for facilitating the possession of the secured assets being obtained by the secured creditor. 37. The secured creditor respondent makes a distinction between the contents of an affidavit contemplated under Section 14 of the Act and the truth or veracity of such contents on the same lines as in the Evidence Act, 1872 and the universal rules of evidence in the proof of a document and the distinction between the proof of the contents of the document and the truth of the contents of the document. Several relevant provisions of the Evidence Act have been quoted in such context and it has been submitted that even Order XVIII Rule 4 of the Code of Civil Procedure, 1908 cannot be read to have altogether dispensed with the presence of a witness in court for his examination-in-chief. 38. Section 14 of the Act brings to the fore the ugly scars that an amending statute may leave on the face of the original provision if the amendment is not sutured with a degree of dexterity. The third proviso introduced by amendment to Section 14 of the Act, for instance, makes no sense at all and is an obvious mistake.
Section 14 of the Act brings to the fore the ugly scars that an amending statute may leave on the face of the original provision if the amendment is not sutured with a degree of dexterity. The third proviso introduced by amendment to Section 14 of the Act, for instance, makes no sense at all and is an obvious mistake. In its plain meaning, such proviso dispenses with the requirement of filing an affidavit in any pending proceedings under Section 14 of the Act “on the date of commencement of this Act.” What such proviso meant to say - though it is generally impermissible to indulge in such exercise - is that the requirement of the affidavit was made prospective for requests made under Section 14 of the Act subsequent to the 2013 Amendment coming into effect; and the filing of the affidavit not being required in proceedings under Section 14 of the Act instituted prior to such date. Instead, the proviso makes some meaningless reference to proceedings pending under Section 14 of the Act on the date of the commencement of the Act itself! The expression, “after satisfying the contents of the affidavit pass suitable orders”, equally, does not make any real sense, whether by the hallowed tests of Wren and Martin or even the lowly benchmarks of colloquial Indian English. The 2013 Amendment to Section 14 of the Act is otherwise indecorous in its changing the order of reference as in the original provision of “the chief metropolitan magistrate or the district magistrate” to “the district magistrate or the chief metropolitan magistrate” in the amended provisions except in the amendment incorporated in sub-section (3) thereof where the original order of reference is retained. Further, there is an obvious “or” missing in amended Section 14(3) of the Act. The provision should read, after amendment, as, “No act of the Chief Metropolitan Magistrate or the District Magistrate or any officer authorised by the Chief Metropolitan Magistrate or District Magistrate …”, but the “or” (indicated in bold here) is missing and it is not a mistake in any book or in the provision as appearing in SCC OnLine. In the copy of Bill no. 122 of 2011, which culminated in Act I of 2013 on January 3, 2013, the “or” was missing in Section 5(c) in the 34th line of the Bill.
In the copy of Bill no. 122 of 2011, which culminated in Act I of 2013 on January 3, 2013, the “or” was missing in Section 5(c) in the 34th line of the Bill. The same mistake appears in Section 6(c) of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 as reported at AIR 2013 Acts 61 and 2013 (1) Current Indian Statutes (Part II) 1. In the statement of objects and reasons as evident on the website www.prsindia.org relating to Bill no. 122 of 2011 (dated November 30, 2011), other aspects of the proposed amended provisions have been referred to, but there is no whisper in respect of the amendment proposed by the Bill to Section 14 of the said Act of 2002. 39. Though the interpretation of a provision is scarcely based on the statement of objects and reasons in support of the statute, the statement of objects and reasons in an amending Act is, sometimes, of some relevance. But any which way amended Section 14 of the Act may be interpreted, it does not admit of the construction attributed by the petitioners to the words, “after satisfying the contents of the affidavit pass suitable orders”, to imply a fact-finding inquiry into the veracity of the contents of the affidavit. 40. Even if it is accepted for argument’s sake that such a construction is possible, that would entail notices to be issued to the borrowers and other persons likely to be affected by any order that may be passed on such requests. The provision does not prescribe or warrant such an elaborate process, particularly, as the affidavit does not call for such other persons to be identified or their particulars or addresses or the extent of their interest in any secured asset to be indicated. The rules of natural justice are, in modern jurisprudence, not as indispensable as they once were. If the context of a provision in the overall backdrop of the relevant statute does not require any notice to be issued at a particular stage to all who may be affected by the non-adjudicatory order that may be passed at such stage, the blind deference to the principles of natural justice would be impermissible.
If the context of a provision in the overall backdrop of the relevant statute does not require any notice to be issued at a particular stage to all who may be affected by the non-adjudicatory order that may be passed at such stage, the blind deference to the principles of natural justice would be impermissible. If, however, a person affected by an order passed under Section 14 of the Act had no recourse to any remedy, the principles of natural justice would have had to be read into the provision and an element of adjudication attributed thereto. Section 14(3) of the Act is a complete answer in this case as it mandates that no act of either official named in Section 14 of the Act or of any subordinate officer delegated the limited duty under Section 14(1A) thereof “done in pursuance of this section shall be called in question in any court or before any authority.” Such provision, unmistakably, keeps the acts done by the relevant authorities under Section 14 of the Act insulated from a challenge before any court or authority, though a challenge on the ground of complete lack of jurisdiction in proceedings under Article 226 of the Constitution cannot fall within the general sweep of the embargo under Section 14(3) of the Act. Thus, theoretically, an order or any other act of the relevant authorities under Section 14 of the Act can be subjected to scrutiny under Article 226 of the Constitution by any person affected thereby; but the High Court will entertain the same only in the extreme case of complete lack of jurisdiction or the disproportionality of the steps taken where proportionality has to be seen on the anvil of the wide authority available under the provision. In effect, the right of any person other than the concerned secured creditor to maintain a challenge under Article 226 of the Constitution to any act done by the relevant authorities under Section 14 of the Act, and the corresponding propriety of the High Court to receive the same, exists barely short of the vanishing point.
In effect, the right of any person other than the concerned secured creditor to maintain a challenge under Article 226 of the Constitution to any act done by the relevant authorities under Section 14 of the Act, and the corresponding propriety of the High Court to receive the same, exists barely short of the vanishing point. Only in the rare cases – where the declaration made in the affidavit is so absurd that no reasonable authority could have accepted it at face value or where the magistrate lacks jurisdiction or the assistance is illegal or grossly disproportionate – would a High Court be excited to entertain the petition under Article 226 of the Constitution. However, if the secured creditor does not obtain the requisite assistance from a magistrate or the request under Section 14 of the Act is left unattended to for an unreasonable period of time, the secured creditor may invoke such extraordinary jurisdiction of the relevant High Court. 41. In the context of the right conferred to a secured creditor by the express words of the said Act of 2002, Section 14(3) of the Act is a necessary corollary as long as Section 17 thereof accommodates a challenge at some stage to the measures taken by a secured creditor under Section 13(4) of the Act that may be launched by any person aggrieved thereby. The unreasonableness in original Section 17 of the Act in treating unequals on the same footing has been removed upon the observation in such regard in Mardia Chemicals Limited. Since Section 34 of the Act, difficult as it is to accept, and the apparent inconsistency between Section 35 and Section 37 thereof are of limited relevance in the present set of facts, the effect of Section 17 of the Act on the legal issue herein may be seen without the interpretation of Section 17 of the Act being overly tinged by the reservations as to the other three named provisions. 42. Section 17(1) gives, in theory, every person aggrieved by any of the “measures … taken” by the secured creditor or its authorised officer under Section 13(4) of the Act a right to carry the grievance to the appropriate tribunal. Disregarding the time-limit indicated in the provision for the moment, a question arises in the context as to the stage when proceedings under Section 17(1) may be launched.
Disregarding the time-limit indicated in the provision for the moment, a question arises in the context as to the stage when proceedings under Section 17(1) may be launched. The question is intertwined with the issue of limitation, particularly since a petition under Section 17 of the Act has to be regarded as an original action and not an appeal as mistakenly indicated in the heading of such section. 43. In its original form, Section 17 had three sub-sections: the first covering the right to invoke the same and specifying the period of limitation therefor; the second requiring a deposit to be made by the borrower invoking such provision, with no reference to any deposit or fees to be paid by any other person aggrieved within the meaning of the expression “Any person (including borrower) aggrieved” in sub-section (1); and, the reference to the Recovery of Debts due to Banks and Financial Institutions Act, 1993 for proceedings under Section 17 of the Act of 2002 to be decided in accordance therewith. Following the judgment in Mardia Chemicals Limited, which was rendered on April 8, 2004, whole-scale changes were made to Section 17 of the Act by the Amending Act of 2004. The major change brought in by the 2004 Amendment was to make a distinction between applicants under Section 17 of the Act who are borrowers and applicants who are not. 44. For the present purpose, sub-sections (1) to (4) of amended Section 17 of the Act may be specially noticed: “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 forth-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. Explanation.
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 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 recourse taken by the secured creditor under subsection (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.” 45. The Rules of 2002 were amended in 2007 by prescribing varying fees payable by borrowers and other persons aggrieved applying under Section 17 of the Act. 46.
The Rules of 2002 were amended in 2007 by prescribing varying fees payable by borrowers and other persons aggrieved applying under Section 17 of the Act. 46. Though sub-section (1) of Section 17 of the Act made a distinction between borrowers and other persons applying thereunder, at least, in the matter of the fees that may be prescribed for the two different classes, the distinction between borrowers and other persons aggrieved may have been lost in the other parts of the section. Sub-section (2) describes the scope of the adjudication before the tribunal. The width of such provision has also to be gauged from Section 34 of the Act that precludes the jurisdiction of civil courts “to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine …” To boot, Section 34 prohibits a court or other authority to issue any injunction “in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 …” The extent of the authority available under Section 17(2) of the Act has also to be viewed in the context of Section 35 of the Act that gives the provisions of the Act overriding effect; though there is an anomaly in Section 37 of the Act providing that “The provisions of this act or the rules made thereunder shall be in addition to, and not in derogation of, … any other law for the time being in force.” 47. Thus, a borrower or other person aggrieved by any of the measures taken by a secured creditor under Section 13(4) of the Act may approach the appropriate tribunal under Section 17 of the Act in lieu of a civil suit that may have been brought by such person but for the prohibition under Section 34 of the Act. The key words governing the statutory right of application under Section 17 of the Act are “person … aggrieved by any of the measures” and “taken” appearing in sub-section (1) thereof.
The key words governing the statutory right of application under Section 17 of the Act are “person … aggrieved by any of the measures” and “taken” appearing in sub-section (1) thereof. Though the present case pertains to an attempt by the secured creditor to take possession of the solitary secured asset, the interpretation of a provision cannot be confined to the one limb applicable to the case in hand by turning a Nelson’s eye to the other comparable limbs. The expression “any of the measures” in Section 17(1) of the Act is relatable to the expression “take recourse to one or more of the following measures” in Section 13(4) of the Act which, in turn, covers the four situations enumerated in clauses (a) to (d) thereof. The measures available to a secured creditor to recover its secured debt under the four clauses of Section 13(4) of the Act are to take possession of the secured assets; to take over the management of the business of the borrower if such business is held as security for the debt; appoint any person to manage the secured assets taken possession of; and, demand the outstanding payment from any third party for any secured asset sold by a borrower to such third party. 48. A deeper scrutiny of the nature of the measures available to a secured creditor under Section 13(4) of the Act reveals certain inconsistencies and the unreasonable harshness with which the statute operates that may render it unworkable or susceptible to divers challenges. Since it is possible to mortgage a tenanted property, in which case the mortgagee cannot evict the tenants despite being entitled under the Act to the mortgaged asset, the concept of possession as evident from the statute makes no apparent distinction between notional possession and actual physical possession. Clause (b) of Section 13(4) of the Act permits the secured creditor to take over the management of the business of the borrower but restricts the right of the secured creditor to transfer the same by way of lease, assignment or sale to such cases where the substantial part of the business of the borrower is held as security. The expression, “substantial part”, is left undefined.
The expression, “substantial part”, is left undefined. Again, the second proviso to clause (b) permits a secured creditor to take over the management of such business of the borrower which is relatable to the security of the debt if such business is severable from the remainder of the business of the borrower. 49. The said Act of 2002, heavily loaded as it is in favour of the secured creditors, betrays an impression that it was not in the contemplation of the legislature that the secured creditors covered by the Act could do any wrong. If a poor pre-mortgage tenant in possession of a small portion of the mortgaged property has to pay the fees under Rule 13 of the said Rules as a proportion of the amount claimed as due by the secured creditor against the borrower for a grievance that such pre-mortgage tenant has been illegally evicted, it is no real remedy at all that is available to such a person under Section 17 of the Act. Similarly, if the grievance of an impecunious borrower is that the entire business of the borrower has been taken over by the secured creditor despite a small fraction of such business being relatable to the security or the debt, such borrower would be required to pay the enormous fees under Rule 13 of the Rules, despite such borrower’s complaint pertaining only to the high-handedness or illegal measure adopted by the secured creditor. The caps of Rs. 50,000/- or Rs. 1 lakh may appear to be small change in Delhi, but such amounts go very far in many villages and small towns. 50. If Section 34 of the Act was not in the statute, it would have been open to the pre-mortgage tenant or the borrower whose business had been taken over in its entirety in derogation of the second proviso to clause (b) of Section 13(4) of the Act, referred to in the immediate preceding paragraph, to institute suits since the acts complained of in either case would not be “measures” permissible under the provision. But such a suit is barred by virtue of Section 34 of the Act; and, the previous provision as to the discretion available to the tribunal to waive the deposit in certain cases has been taken out by the 2004 Amendment to the Act. 51.
But such a suit is barred by virtue of Section 34 of the Act; and, the previous provision as to the discretion available to the tribunal to waive the deposit in certain cases has been taken out by the 2004 Amendment to the Act. 51. The harshness with which the said Act of 2002 operates is relevant for the purpose of interpreting the right that is conferred by Section 17 thereof and the stage at which such right may be exercised. The words, “person … aggrieved by any of the measures … taken by the secured creditor” would cover any steps taken by or on behalf of the secured creditor to actuate any of the measures referred to in Section 13(4) of the Act and would not imply that the secured creditor or its authorised officer has to complete the measure before any person aggrieved by the initiation of any measure can approach the tribunal under such provision. In view of the conjoint operation of the proviso to Section 13(3A) of the Act and the explanation to Section 17(1) thereof, there must be some overt act attributable to the secured creditor or on its behalf set in the direction of the measures referred to in Section 13(4) of the Act for any person aggrieved (including a borrower) thereby to maintain a petition under Section 17 of the Act. However, it is an entirely different matter as to what orders may be made on such petition, as that would depend on the facts of a case. That a petition is maintainable at a particular stage does not imply that orders as sought therein must be made therein, whether immediately or otherwise. 52. The right to approach the tribunal under Section 17 of the Act opens up after the Section 13(3A) stage is over and the slightest steps are taken by the secured creditor in respect of the measures available to the secured creditor under Section 13(4) thereof. The relevant words in Section 17 of the Act cannot be seen to suggest that the secured creditor would complete the act of availing of any of the measures under Section 13(4) of the Act before any person aggrieved thereby may be heard to complain thereagainst.
The relevant words in Section 17 of the Act cannot be seen to suggest that the secured creditor would complete the act of availing of any of the measures under Section 13(4) of the Act before any person aggrieved thereby may be heard to complain thereagainst. To emphasise the point, any person aggrieved by any overt steps taken by a secured creditor to actuate any of the measures referred to in Section 13(4) of the Act may immediately approach the appropriate tribunal under Section 17 thereof within forty-five days of being aware of such steps or being deemed to be aware thereof. 53. The inherent right of a person to institute a civil suit in respect of a civil dispute exists at all times. But when a civil suit is barred, by express provision of a statute or by the inescapable implication thereof, the stage at which the grievance can be canvassed before the alternative forum indicated in the statute may also be restricted. Such position has been judicially accepted in several situations, including in respect of the said Act of 2002 by the judgment in Mardia Chemicals Limited. As long as the remedy that was available by way of a civil suit is not completely obliterated by the statute prohibiting the access to the civil court, the legality of the relevant provision may pass muster. 54. When a secured creditor approaches a chief metropolitan magistrate or district magistrate under Section 14 of the Act, such secured creditor must be seen to have taken an overt step in the direction of actuating the measures referred to under Section 13(4) of the Act. In most cases, the borrower or any other person likely to be affected by the order that such chief metropolitan magistrate or district magistrate may pass will not be aware of such move. But if such person is aware thereof, or his knowledge in respect thereof can be affixed, the right to apply under Section 17 of the Act would have accrued to him. In the proceedings under Section 17 of the Act, such person may not directly challenge the order that may have been passed by the chief metropolitan magistrate or the district magistrate on the secured creditor’s request. Section 14(3) of the Act prohibits such course of action.
In the proceedings under Section 17 of the Act, such person may not directly challenge the order that may have been passed by the chief metropolitan magistrate or the district magistrate on the secured creditor’s request. Section 14(3) of the Act prohibits such course of action. What such person may challenge, however, is the step taken by the secured creditor to actuate the measures referred to in Section 13(4) of the Act: that is the cause of action for approaching the relevant tribunal under Section 17. 55. Section 14(3) of the Act does not imply that the invocation of Section 14 by a secured creditor cannot be immediately questioned by a person aggrieved by the measures taken by a secured creditor to obtain or try to obtain the secured asset. Likewise, though the truth of the contents of the affidavit filed before the chief metropolitan magistrate or the district magistrate under Section 14 of the Act cannot be assessed in the non-adjudicatory process undertaken by such official, the veracity of such contents can be called into question in subsequent proceedings under Section 17 of the Act. It is not clear, though, as to why a declaration covering the nine points has been required by the 2013 Amendment to be filed “by an affidavit duly affirmed by the authorised officer of the secured creditor”. Affidavits are, ordinarily, required to be filed in support of pleadings before a court or other judicial authority since courts and other judicial authorities have, or are conferred, the power to take action against perjury. Surely, a chief metropolitan magistrate or a district magistrate in receipt of an affidavit in discharge of a non-adjudicatory function cannot take action against any misstatement contained therein. The purpose appears to be to make the authorised officer of the secured creditor accountable, in some vague manner, for the contents of the affidavit or make the secured creditor and its concerned authorised officer susceptible to any action that may be taken by the tribunal upon a false statement coming to light in course of the proceedings under Section 17 of the Act. 56.
56. To return to the scope of Section 17 of the Act, the stage at which a petition thereunder can be received and whether every aggrieved person invoking such provision may obtain adequate redressal of the grievance, it bears reiteration that the essence of the exercise conducted under Section 17 is captured in subsection (2) thereof. Section 17(3) of the Act, at first blush, gives the impression that it may not be possible for every aggrieved person approaching the tribunal to obtain complete relief, since such sub-section speaks of restoration of the possession of the secured asset only to the borrower and not to the other persons entitled to approach a tribunal under Section 17 of the Act. There does not appear to be any rationale for not conceiving of a situation where the person aggrieved applying under Section 17 may be other than a borrower and who may be legitimately entitled to be put back into possession of a property that he was illegally dispossessed of in the secured creditor taking recourse to any of the measures referred to in Section 13(4) of the Act. It is here that it must be said, with some diffidence, that the said Act of 2002 is, at best, inartistic and inarticulate in most parts and, at worst, it may even be unworkable. If Section 17 of the Act covers all persons aggrieved by any of the measures taken by a secured creditor under Section 13(4) of the Act, it should reasonably have expressly included aggrieved non-borrowers in sub-section (3) thereof. After all, it cannot be said that an aggrieved non-borrower who may have been illegally dispossessed of a property by a secured creditor will not be entitled to restitution. Equally, it would be absurd to conclude that sub-section (3) implies that if an aggrieved non-borrower is illegally dispossessed of a property by a secured creditor, the possession will be required to be made over by the tribunal to the borrower and not to the aggrieved non-borrower. If such were to be the interpretation of Section 17(3) of the Act, every unwilling landlord would obtain a loan against the tenanted property, default thereon and induce the secured creditor to take possession thereof for restitution to be ultimately effected in favour of the borrower-landlord. 57.
If such were to be the interpretation of Section 17(3) of the Act, every unwilling landlord would obtain a loan against the tenanted property, default thereon and induce the secured creditor to take possession thereof for restitution to be ultimately effected in favour of the borrower-landlord. 57. Section 17(3) is clearly an aberration; but to make Section 17 meaningful and the Act workable, Section 17(3) of the Act has to be read such that the word “borrower” therein would not be governed by the limited definition of such word in Section 2(1)(f) of the Act but will cover any person aggrieved by any of the measures referred to in Section 13(4) of the Act taken by the secured creditor or its authorised officer who has invoked the jurisdiction. The context in which the word “borrower” has been used in connection with the restoration of the possession of the secured assets would require the entire class of persons aggrieved, within the meaning of the relevant expression in Section 17(1) of the Act, to be imported into the word “borrower” in Section 17(3) thereof. Similarly, on a parity of reasoning, the right to receive compensation under Section 19 of the Act will accrue to both the borrowers and other persons aggrieved by reading the words “borrower” and “borrowers” therein to include the entire class of persons who may be aggrieved by any of the measures referred to in Section 13(4) of the Act taken by the secured creditor or its authorised officer who may apply under Section 17 thereof. 58. The direct consequence of Section 17(3) of the Act being interpreted otherwise is that the remedy available to a person other than a borrower aggrieved by any of the measures under Section 13(4) of the Act taken by the secured creditor or its authorised officer, would be illusory. The necessary corollary, in such event, would be that the overriding effect given to the said Act of 2002 by Section 34 thereof would be meaningless if only an adjudication is possible in respect of the grievance of a class of persons under Section 17 of the Act, but the remedy cannot be granted thereunder to such persons. A further by-product of such literal interpretation would be that Section 14 of the Act would be elevated to an adjudicatory exercise when it clearly is not. 59.
A further by-product of such literal interpretation would be that Section 14 of the Act would be elevated to an adjudicatory exercise when it clearly is not. 59. Further, the explanation to Section 17(1) of the Act, in a sense, implies that the embargo to approach the relevant tribunal under Section 17 of the Act is till the stage of Section 13(4) of the Act not being set into motion. If the right to apply under Section 17 of the Act was prohibited till the accomplishment of the relevant measure under Section 13(4) of the Act by the secured creditor, the provision would have expressly said so. Again, the opening part of Section 17(4) of the Act refers to the tribunal’s declaration that “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” and the provision goes on to mandate that upon such declaration “the secured creditor shall be entitled to take recourse to one or more of the measures” under Section 13(4) of the Act to recover “his secured debt.” The very wording of Section 17(4) of the Act contemplates that a challenge to the initiation of a measure under Section 13(4) of the Act by a secured creditor may be entertained and, upon the impugned conduct or action being declared to be appropriate by the tribunal, the secured creditor may complete the relevant measure. 60. The petitioners in this case submit that the objection to the maintainability of this petition raised by the secured creditor respondent, on the ground that the secured asset has not been conveyed in favour of the first petitioner nor has the first petitioner ever been in possession thereof, is fallacious. They suggest that since the first petitioner had responded to the notice under Section 13(2) of the Act, which was brushed aside in purported compliance with Section 13(3A) thereof, and subsequent notices have been issued under Rules 8(1) and 8(2) of the said Rules of 2002, the first petitioner has a cause of action against the secured creditor respondent.
They suggest that since the first petitioner had responded to the notice under Section 13(2) of the Act, which was brushed aside in purported compliance with Section 13(3A) thereof, and subsequent notices have been issued under Rules 8(1) and 8(2) of the said Rules of 2002, the first petitioner has a cause of action against the secured creditor respondent. The petitioners assert that in the district magistrate passing an order on the secured creditor's request under Section 14 of the Act, he has exercised a jurisdiction not vested in him in failing to appreciate that no security interest in respect of any property had been created by the first petitioner in favour of the secured creditor. As such, the petitioners claim that their petition complaining of the impugned order of the district magistrate being without jurisdiction be received and assessed on merits, rather than the first petitioner being shown to the tribunal by way of alternative remedy, which remedy, on a plain reading of Section 17(3) of the Act, is not efficacious. The petitioners insinuate that the judgment in Jawahar Singh is per incuriam as it is contrary to Harshad Govardhan Sondagar. The petitioners insist that the reading of Section 14(3) of the Act in Harshad Govardhan Sondagar is not contrary to any previous dictum of any coordinate or larger Bench of the Supreme Court. They say that the limitation of Section 17(3) of the Act as noticed in Harshad Govardhan Sondagar is a part of the ratio decidendi therein and remains binding on all under Article 141 of the Constitution. They maintain that since Section 14 of the Act has been held in Harshad Govardhan Sondagar to involve a process of adjudication, the character of the process thereunder has always to be regarded as adjudicatory. 61. It is thus, that the several judgments that the parties herein have brought to bear on the legal issue call for consideration.
They maintain that since Section 14 of the Act has been held in Harshad Govardhan Sondagar to involve a process of adjudication, the character of the process thereunder has always to be regarded as adjudicatory. 61. It is thus, that the several judgments that the parties herein have brought to bear on the legal issue call for consideration. Most of the judgments referred to hereafter have been cited by the petitioners, but the secured creditor respondent has relied on several of them to say that a petition under Article 226 of the Constitution at the behest of a person who is affected by any order passed or act done under Section 14 of the Act should not be entertained in view of the efficacious alternative remedy available to such person at the appropriate stage under Section 17 of the Act. 62. In Mardia Chemicals Limited, the Supreme Court considered the challenge to the vires of certain provisions of the said Act of 2002 and the “drastic measures of sale of the property or taking over the management or the possession of the secured assets” by a secured creditor under such Act. Three of the legal issues framed at paragraph 33 of the report may be noticed: “33. Taking an overall view of the rival contentions of the parties, we feel the main questions which broadly fall for consideration by us are: i) … ii) Whether provisions as contained under Sections 13 and 17 of the Act provide adequate and efficacious mechanism to consider and decide the objections/disputes raised by a borrower against the recovery, particularly in view of bar to approach the civil court under Section 34 of the Act? iii) Whether the remedy available under Section 17 of the Act is illusory for the reason it is available only after the action is taken under Section 13(4) of the Act and the appeal would be entertainable only on deposit of 75% of the claim raised in the notice of demand? iv) … v) … vi) Whether the provisions under Sections 13 and 17(2) of the Act are unconstitutional on the basis of the parameters laid down in different decisions of this Court?
iv) … v) … vi) Whether the provisions under Sections 13 and 17(2) of the Act are unconstitutional on the basis of the parameters laid down in different decisions of this Court? vii) …” The judgment noticed the report of the several committees dealing with the delayed recovery of debts advanced by banks and financial institutions and observed that the policy for a more effective legislation could not be faulted. It noticed, in particular, Sections 13, 17 and 34 of the said Act of 2002 as it then existed and several provisions, including key Section 69, of the Transfer of Property Act. It observed that a borrower’s “right to approach the Debts Recovery Tribunal as provided under Section 17 of the Act matures on any measure having been taken under sub-section (4) of Section 13 of the Act.” The judgment held that Section 17 did not give any right of appeal, but such proceedings were “initial proceeding like filing a suit in civil court”. The court found that the pre-deposit as required under original Section 17 was bad, but it is evident that the consideration in that case was primarily from the point of view of borrowers. Paragraph 79 of the judgment that left other problems as to the workability of the Act unaddressed is set out: “79. Some submissions have been made pointing out that in certain circumstances it would not be clear as to in what manner the provisions of the Act would be workable. We feel the objections pointed out are not such which render the statute invalid or unconstitutional. Such problems about working of any particular provision of the Act in any particular factual situation, may be considered as and when they may arise. We, therefore, do not think it necessary to go into those questions.” 63. In Transcore the question that was addressed was whether recovery proceedings instituted by a secured creditor under Section 19 of the 1993 Act had to be withdrawn as a condition precedent to taking recourse to the said Act of 2002.
We, therefore, do not think it necessary to go into those questions.” 63. In Transcore the question that was addressed was whether recovery proceedings instituted by a secured creditor under Section 19 of the 1993 Act had to be withdrawn as a condition precedent to taking recourse to the said Act of 2002. In course of the discussion, the court observed that the “very object of Section 13 of the NPA Act is recovery by non-adjudicatory process.” Apart from the judgment holding that the withdrawal of the proceedings under the 1993 Act was not a condition precedent to a secured creditor taking recourse to the said Act of 2002, it also addressed an ancillary question as to whether Section 13(4) of the Act gave a secured creditor “the power to take actual possession of the immovable property”. This ancillary issue was answered at the end of paragraph 74 by holding that “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.” However, as in Mardia, the challenges to the operation of the said Act of 2002 were considered primarily from the perspective of the borrower and not necessarily on how the provisions operated against non-borrowers entitled to apply under Section 17 of the Act. 64. A judgment reported at (2009) 8 SCC 366 (Indian Overseas Bank v. Ashok Saw Mill) has been placed by the petitioners where the question which was framed at paragraph 24 of the report was, “whether the DRT would have jurisdiction to consider and adjudicate with regard to post 13(4) events or whether its scope in terms of Section 17 of the Sarfaesi Act would be confined to the stage contemplated under Section 13(4) …” In that case the secured creditor issued notices under Section 13(2) of the Act and, upon the noticees not responding thereto, it took possession of the secured assets. Such action was challenged before the Madras High Court in its writ jurisdiction. The challenge was dismissed with liberty to the respondent firm before the Supreme Court to approach the tribunal within 30 days. Since such firm did not approach the tribunal, the bank took steps to sell the secured assets by issuing a notice inviting offers therefor.
Such action was challenged before the Madras High Court in its writ jurisdiction. The challenge was dismissed with liberty to the respondent firm before the Supreme Court to approach the tribunal within 30 days. Since such firm did not approach the tribunal, the bank took steps to sell the secured assets by issuing a notice inviting offers therefor. The firm filed a fresh writ petition before the High Court to challenge the sale notice on the ground that it was unable to move the tribunal upon the expiry of the period of limitation prescribed under the Act. An ad interim order was refused and the petition was posted for final disposal. During the pendency of such petition, the firm approached the tribunal for setting aside the same sale notice. The tribunal passed an interim order, directing the secured creditor to defer the sale. Such interim order was challenged by way of a writ petition by the secured creditor before the High Court, which was disposed of, in the absence of the bank, with liberty to the respondent firm to move the tribunal. During the pendency of an application for review of the order by which the secured creditor’s writ petition was disposed of in its absence, the tribunal allowed some of the properties to be sold by the secured creditor, whereupon the borrower firm withdrew the original proceedings before the tribunal and applied afresh. In view of the original proceedings filed by the borrower before the tribunal being withdrawn, the secured creditor’s review petition was dismissed by the High Court as infructuous. An appeal against such order was dismissed by the Division Bench. The Division Bench order was carried before the Supreme Court. 65. At paragraph 23 of the report, the court held that while secured creditors had been vested with “stringent powers” for the recovery of their dues, “safeguards have also been provided for rectifying any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.” However, the judgment did not notice that in Section 17(3) of the Act the tribunal had apparently only been conferred authority to return possession of a secured asset wrongfully taken to the “borrower”.
The judgment had no occasion either to assess whether the right under Section 17 of the Act could be invoked upon the rudimentary steps being taken in the direction of the measures referred to in Section 13(4) of the Act or such right was confined to the stage after the relevant measure had already been taken and completed. 66. The next judgment cited, in point of time, is of Satyawati Tondon. The facts as evident from paragraphs 30 to 32 of the report reveal that one of the borrowers offered a much lower sum than demanded by the secured creditor in the notice under Section 13(2) of the Act. The secured creditor rejected the settlement, obtained an order under Section 14 of the Act from the district magistrate and, thereafter, issued notices to the principal debtor and guarantor for taking possession of the secured asset. The guarantor instituted a writ petition before the Allahabad High Court which was sought to be resisted on the ground of alternative remedy under Section 17 of the Act. Such objection was not adverted to in the interim order of the High Court against which a petition for special leave to appeal was taken to the Supreme Court. In dealing with the resultant appeal, the Supreme Court discussed Sections 13, 14 and 17 of the Act, in the form such provisions existed at the time, to observe, in passing, at paragraph 21 of the report, that upon a request being made under Section 14 of the Act, “the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, is obliged to take possession of such asset or document and forward the same to the secured creditor”. The substance of the opinion rendered in that case is found at paragraphs 42 and 43 of the report: “42. There is another reason why the impugned order should be set aside. If Respondent 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression “any person” used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14.
The expression “any person” used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under The Sarfaesi Act are both expeditious and effective. “43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasijudicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.” 67. In the subsequent case of Kanaiyalal Lalchand Sachdev, the secured creditor approached the chief metropolitan magistrate under Section 14 of the Act whereupon such magistrate directed a subordinate officer “to take possession of the mortgaged properties after issuing notice to the appellants.” It was such notice that the borrowers challenged before the High Court under Article 226 of the Constitution, which was repelled on the ground of the alternative remedy under Section 17 of the Act. However, the High Court directed the secured creditor to maintain status quo in respect of the matter for a period of ten weeks to enable the borrowers to approach the tribunal. The borrowers sought an extension of the time and the order of status quo, which the High Court rejected.
However, the High Court directed the secured creditor to maintain status quo in respect of the matter for a period of ten weeks to enable the borrowers to approach the tribunal. The borrowers sought an extension of the time and the order of status quo, which the High Court rejected. The orders of dismissal of the writ petition and rejection of the subsequent application were challenged before the Supreme Court. Before dismissing the appeals with costs, the Supreme Court observed as follows at paragraph 22 of the report, that clearly postulates that the act of making a request by a secured creditor under Section 14 of the Act is capable of being complained of under Section 17 thereof which provides an efficacious remedy: “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.” 68. A single Bench judgment reported at (2011) 2 DRTC 543 Ker (Sami K. v. Branch Manager, Bank of India) has been brought by the petitioners for its recognition, at paragraph 6 of the report, that the “mere decision of the financial institution to approach the Magistrate under Sec. 14 would also constitute a measure under Sec. 13(4)” which would entitle a person aggrieved thereby to apply under Section 17 of the Act. 69. The next judgment that has to be noticed is of V. Noble Kumar, which has been a source of much chagrin to both borrowers and other persons aggrieved entitled to apply under Section 17 of the Act. The secured creditor in that case approached the appropriate chief judicial magistrate under Section 14 of the Act upon its notice under Section 13(2) thereof going unheeded. The date of the magistrate’s order in that case is of importance since Section 14 of the Act was then in its unamended form. On December 14, 2009 the chief judicial magistrate appointed an advocate commissioner to take possession of the secured asset and hand over the same to the secured creditor.
The date of the magistrate’s order in that case is of importance since Section 14 of the Act was then in its unamended form. On December 14, 2009 the chief judicial magistrate appointed an advocate commissioner to take possession of the secured asset and hand over the same to the secured creditor. The guarantor to the transaction invoked the writ jurisdiction of the Madras High Court against the order of the chief judicial magistrate. Paragraphs 20 and 21 of the report deal with the provisions of law as relevant for the adjudication in that case, but paragraph 23 of the report noticed the 2013 Amendment to Section 14 of the Act before paragraph 25 of the report summed up what a magistrate is required to do under amended Section 14 of the Act: “20. In every case where the objections raised by the borrower are rejected by the secured creditor, the secured creditor is entitled to take possession of the secured assets. In our opinion, such action – having regard to the object and scheme of the Act – could be taken directly by the secured creditor. However, visualising the possibility of resistance for such action, Parliament under Section 14 also provided for seeking the assistance of the judicial power of the State for obtaining possession of the secured asset, in those cases where the secured creditor seeks it. “21. Under the scheme of Section 14, a secured creditor who desires to seek the assistance of the State’s coercive power for obtaining possession of the secured asset is required to make a request in writing to the Chief Metropolitan Magistrate or District Magistrate within whose jurisdiction, the secured asset is located praying that the secured asset and other documents relating thereto may be taken possession thereof. The language of Section 14 originally enacted purportedly obliged the Magistrate receiving a request under Section 14 to take possession of the secured asset and documents, if any, related thereto in terms of the request received by him without any further scrutiny of the matter.” “23. We must make it clear that these provisions were not in existence on the date of the order impugned in the instant proceedings. These amendments are made to provide safeguards to the interest of the borrower.
We must make it clear that these provisions were not in existence on the date of the order impugned in the instant proceedings. These amendments are made to provide safeguards to the interest of the borrower. These provisions stipulate that a secured creditor who is seeking the intervention of the Magistrate under Section 14 is required to file an affidavit furnishing the information contemplated under various sub-clauses (i) to (ix) of the proviso and obligates the Magistrate to pass suitable orders regarding taking of the possession of the secured assets only after being satisfied with the contents of the affidavits.” “25. The satisfaction of the Magistrate contemplated under the second proviso to Section 14(1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset.” 70. The judgment, thereafter, proceeded to hold that it was not necessary for a secured creditor to first make an attempt to obtain possession of secured assets on its own before approaching the magistrate under Section 14 of the Act. It then discussed the scope of the proceedings under Section 17 of the Act to conclude the following at paragraphs 27 and 28 of the report: “27. … Therefore, the borrower is always entitled to prefer an “appeal” under Section 17 after the possession of the secured asset is handed over to the secured creditor. …” “28. It can be noticed from the language of the proviso to Section 13(3-A) and the language of Section 17 that an “appeal” under Section 17 is available to the borrower only after losing possession of the secured asset. The employment of the words “aggrieved by … taken by the secured creditor” (emphasis supplied) in Section 17(1) clearly indicates the appeal under Section 17 is available to the borrower only after losing possession of the property. To set at naught any doubt regarding the interpretation of Section 17, the proviso to sub-section (3-A) of Section 13 makes it explicitly clear that either the reasons indicated for rejection of the objections of the borrower or the likely action of the secured creditor shall not confer any right under Section 17.” 71.
To set at naught any doubt regarding the interpretation of Section 17, the proviso to sub-section (3-A) of Section 13 makes it explicitly clear that either the reasons indicated for rejection of the objections of the borrower or the likely action of the secured creditor shall not confer any right under Section 17.” 71. The judgment in V. Noble Kumar noticed the previous Supreme Court judgment in Mardia Chemicals Limited but none of the other judgments of such Court rendered before it. In particular, the opinion in Kanaiyalal Lalchand Sachdev and the reading of Ashok Saw Mill therein were not brought to the attention of the Bench in V. Noble Kumar. Apart from the fact that the view expressed in paragraph 23 of the report and thereafter in V. Noble Kumar is obiter dictum – which has also to be regarded in high esteem as it is of the Supreme Court – to the extent that such view is contrary to the clear enunciation of the law in Kanaiyalal Lalchand Sachdev, there appears to be a doubt as to its correctness. 72. Three orders of this court have been brought by the petitioners as to the views expressed by this court immediately after V. Noble Kumar came to be cited before different Benches. In the order of March 25, 2014 in WP No. 232 of 2014 (Santosh Kedia v. Standard Chartered Bank), a single Bench rejected a petition under Article 226 of the Constitution by which, inter alia, notices issued by the secured creditor under Rule 8(1) and 8(2) of the said Rules of 2002 were challenged. It was asserted by the borrower-petitioner that in view of V. Noble Kumar the borrower could not apply under Section 17 of the Act since only symbolic possession of the secured asset had been taken and not actual physical possession thereof. The order rejected the petition and permitted the petitioner to approach the tribunal under Section 17 of the Act upon reading the binding dictum in V. Noble Kumar to be restricted to the desirability of entertaining a petition under Article 226 of the Constitution against an order passed by a magistrate under Section 14 of the Act.
The order rejected the petition and permitted the petitioner to approach the tribunal under Section 17 of the Act upon reading the binding dictum in V. Noble Kumar to be restricted to the desirability of entertaining a petition under Article 226 of the Constitution against an order passed by a magistrate under Section 14 of the Act. The next order, in WP No. 353 of 2014 (Mercury Exporters and Manufacturing Private Limited v. Punjab National Bank), pertained to a challenge under Article 226 of the Constitution to a notice issued by the secured creditor to the borrowers that the secured creditor would take possession of the secured asset if the borrowers failed to deliver possession thereof by a specified date. The single Bench found that the secured creditor had only taken symbolic possession of the secured asset and what the secured creditor demanded was that actual physical possession of the secured asset be made over to it. The order referred to V. Noble Kumar, that the right to apply under Section 17 can be exercised “only after possession of the secured asset is lost”, refused to entertain the petition on the ground that at such stage “no right of the petitioners is affected by the action taken in terms of the Act so as to call for interference” and left the petitioners free to approach the tribunal “once physical possession of the secured asset is taken.” The appeal from such order was dealt with by an order of May 20, 2014 in APO No. 2014 (Mercury Exporters and Manufacturing Private Limited v. Punjab National Bank). The order under appeal was not interfered with and it was observed that “in view of the decision in V. Noble Kumar, the debtor has to await the measures under Section 13(4) of the Act being taken by the secured creditor before approaching the appropriate Tribunal.” 73. In a single Bench judgment reported at AIR 2014 Cal 161 (Vision Comptech Integrators Ltd v. State Bank of India) both Harshad Govardhan Sondagar and V. Noble Kumar were noticed to make a distinction between the stages at which a borrower could apply under Section 17 of the Act and a bona fide lessee or tenant in the secured asset could.
It was observed that to “protect a bona fide lessee or tenant from being drowned in a situation of no remedy being available under the Act, … Harshad Govardhan Sondagar (supra) has even read the requirement of complying with natural justice in Section 14 of the Act.” The conclusion drawn from such judgment was that “what was otherwise a non-adjudicatory process would now partake the character of a quasi-judicial proceeding.” It was also held that the dictum in V. Noble Kumar, that the tribunal could be approached under Section 17 of the Act only after physical possession of the secured asset had been taken over by the secured creditor, was confined to borrowers and did not apply to bona fide lessees or tenants in possession of the secured asset. 74. The next judgment cited by the petitioners, and also relied upon by the secured creditor, is reported at (2014) 1 SCC 479 (Jagdish Singh v. Heeralal). The appellant before the Supreme Court was an auction- purchaser of a plot of land which was a secured asset sold by the secured creditor under the said Act of 2002 without making over possession of the land to the purchaser. After the auction-purchaser paid the entire consideration, he discovered that the borrowers had filed a suit in which the secured creditor and the auction-purchaser had been impleaded and the borrowers had also applied under Section 17 of the said Act of 2002 before the appropriate tribunal to challenge the sale. The secured creditor applied for rejection of the plaint relating to the suit by citing Sections 34 and 35 of the said Act of 2002. The suit court upheld the objection and rejected the plaint. The borrowers preferred a first appeal from such order which was allowed by the High Court. Such appellate order was questioned before the Supreme Court. The Supreme Court held that the expression, “Any person”, in Section 17(1) of the Act was of wide import and covered “any other person who may be affected by action taken under Section 13(4)” of the Act. The decision is not of much significance in the present context, except that the Supreme Court found that the measures taken by a secured creditor under Section 13(4) of the Act could not be called into question before a civil court by virtue of Section 34 thereof.
The decision is not of much significance in the present context, except that the Supreme Court found that the measures taken by a secured creditor under Section 13(4) of the Act could not be called into question before a civil court by virtue of Section 34 thereof. That would imply that the Supreme Court found that the grievance of every person aggrieved, within the meaning of the expression “person … aggrieved” in Section 17 of the Act, may be addressed under such provision, though the judgment did not discuss such aspect or pronounce directly thereupon. 75. In chronological order, next came the judgment in Harshad Govardhan Sondagar. Since the correctness of the ratio decidendi in such judgment has been doubted in Jawahar Singh, which the petitioners say is per incuriam, the facts in Harshad Govardhan Sondagar need to be noticed in some detail to appreciate the legal finding therein. 76. The appellants before the Supreme Court claimed to be tenants in divers premises in Mumbai. Such premises were mortgaged against loans obtained by the owners of the properties. The secured creditors made requests under Section 14 of the Act to the appropriate magistrates to take possession of the premises and make over the same to the secured creditors. Threatened by their dispossession of the premises, the tenants approached the court. In course of the submission before the Supreme Court, as evident from the report, the judgments in Transcore, Ashok Saw Mill and Satyawati Tondon, among others, were cited, though Ashok Saw Mill and Satyawati Tondon were not discussed in any manner therein. The two principal questions that the Supreme Court framed were as follows: “15. The first question ... is whether the provisions of the Sarfaesi Act have in any way affected the right of a lessee to remain in possession of the secured asset during the period of a lease.” “30. We may next consider whether a lessee has any remedy by way of an appeal under Section 17 of the Sarfaesi Act when the secured creditor attempts to take over possession of the secured asset which is in possession of the lessee.” 77.
We may next consider whether a lessee has any remedy by way of an appeal under Section 17 of the Sarfaesi Act when the secured creditor attempts to take over possession of the secured asset which is in possession of the lessee.” 77. In answering the first question, the Court held at paragraph 21 of the report that where “the lawful possession of the secured asset is not with the borrower, but with the lessee under a valid lease, the secured creditor cannot take over possession of the secured asset until the lawful possession of the lessee gets determined.” The court then noticed amended Section 14 of the Act, which came into force on January 15, 2013, though the special leave petition in the lead matter before the court was from a judgment and order of August 20, 2011 passed by the Bombay High Court. The three different sets of directions that were issued by the Supreme Court in that case reveal that they covered special leave petitions carried to the Supreme Court in 2013 (paragraph 37.1), special leave petitions instituted in 2012 (Paragraph 37.2) and other special leave petitions also instituted in 2012 (paragraph 37.3). In the context of amended Section 14 of the said Act (which appears not to have been applicable in several of the matters before the Supreme Court where requests under Section 14 of the Act had been made prior to the 2013 Amendment coming into effect), the Supreme Court observed thus at paragraphs 25, 26, 28 and 29 of the report: “25. … Hence, possession of the secured asset from a lessee in lawful possession under a valid lease is not required to be taken under the provisions of the Sarfaesi Act and the Chief Metropolitan Magistrate of the District Magistrate, therefore, does not have any power under the Section 14 of the Sarfaesi Act to take possession of the secured asset from such a lessee and hand over the same to the secured creditor.
When, therefore, a secured creditor moves the … Magistrate for assistance to take possession of the secured asset, he must state in the affidavit accompanying the application that the secured asset is not in possession of a lessee under the valid lease made prior to creation of the mortgage by the borrower or made in accordance with Section 65-A of the Transfer of Property Act prior to receipt of a notice under sub-section (2) of Section 13 of the Sarfaesi Act by the borrower. …” “26. … Where, therefore, such a request (under Section 14 of the Act) is made by the secured creditor and the … Magistrate finds that the secured asset is in possession of a lessee but the lease under which the lessee claims to be in possession of the secured asset stands determined in accordance with Section 111 of the Transfer of Property Act, the … Magistrate may pass an order for delivery of possession of secured asset in favour of the secured creditor to enable the secured creditor to sell and transfer the same under the provisions of the Sarfaesi Act. Sub-section (6) of Section 13 of the Sarfaesi Act provides that any transfer of secured asset after taking possession of secured asset by the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset. In other words, the transferee of a secured asset will not acquire any right in a secured asset under sub-section (6) of Section 13 of the Sarfaesi Act, unless it has been effected after the secured creditor has taken over possession of the secured asset. Thus, for the purpose of transferring the secured asset and for realising the secured debt, the secured creditor will require the assistance of the Chief Metropolitan Magistrate or the District Magistrate for taking possession of a secured asset from the lessee where the lease stands determined by any of the modes mentioned in Section 111 of the Transfer of Property Act.” “28.
A reading of sub-rules (1) and (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002 would show that the possession notice will have to be affixed on the outer door or at the conspicuous place of the property and also 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 having sufficient circulation in that locality, by the authorised officer. AT this stage, the lessee of an immovable property will have notice of the secured creditor making efforts to take possession of the secured assets of the borrower. When, therefore, a lessee becomes aware of the possession being taken by the secured creditor, in respect of the secured asset in respect of which he is the lessee, from the possession notice which is delivered, affixed or published in sub-rule (1) and sub-rule (2) of Rule 8 of the Security Interest (Enforcement) Rules, 2002, he may either surrender possession or resist the attempt of the secured creditor to take the possession of the secured asset by producing before the authorised officer proof that he was inducted as a lessee prior to the creation of the mortgage or that he was a lessee under the mortgagor in accordance with the provisions of Section 65-A of the Transfer of Property Act and that the lease does not stand determined in accordance with Section 111 of the Transfer of Property Act. If the lessee surrenders possession, the lease, even if valid, gets determined in accordance with clause (f) of Section 111 of the Transfer of Property Act, but if he resists the attempt of the secured creditor to take possession, the authorised officer cannot evict the lessee by force but has to file an application before the Chief Metropolitan Magistrate of the District Magistrate under Section 14 of the Sarfaesi Act and state in the affidavit accompanying the application, the name and address of the person claiming to be the lessee. When such an application is filed, the Chief Metropolitan Magistrate or the District Magistrate will have to give a notice and give an opportunity of hearing to the person claiming to be the lessee as well as to the secured creditor, consistent with the principles of natural justice, and then take a decision. …” “29.
When such an application is filed, the Chief Metropolitan Magistrate or the District Magistrate will have to give a notice and give an opportunity of hearing to the person claiming to be the lessee as well as to the secured creditor, consistent with the principles of natural justice, and then take a decision. …” “29. … In our view, therefore, the decision of the Chief Metropolitan Magistrate or the District Magistrate can be challenged before the High Court under Articles 226 and 227 of the Constitution by any aggrieved party and if such a challenge is made, the High Court can examine the decision of the Chief Metropolitan Magistrate or the District Magistrate, as the case may be, in accordance with the settled principles of law.” 78. On the efficacy of Section 17 of the Act to provide relief to a lessee legitimately in possession of a secured asset under a valid lease, paragraph 32 of the report sums up the legal possession as enunciated in the judgment: “32. … But when we read sub-section (3) of Section 17 of the Sarfaesi Act, we find that the Debts Recovery Tribunal has powers to restore possession of the secured asset to the borrower only and not to any person such as a lessee. Hence, even if the Debts Recovery Tribunal 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 the Act. It cannot restore possession of the secured asset to the lessee. Where, therefore, the Debts Recovery Tribunal considers the application of the lease and comes to the conclusion that the lease in favour of the lessee was made prior to the creation of mortgage or the lease though made after the creation of mortgage is in accordance with the requirements of Section 65-A of the Transfer of Property Act and the lease was valid and binding on the mortgagee and the lease is yet to be determined, the Debts Recovery Tribunal will not have the power to restore possession of the secured asset to the lessee. In our considered opinion, therefore, there is no remedy available under Section 17 of the Sarfaesi Act to the lessee to protect his lawful possession under a valid lease.” 79.
In our considered opinion, therefore, there is no remedy available under Section 17 of the Sarfaesi Act to the lessee to protect his lawful possession under a valid lease.” 79. The judgment then proceeded to discuss Transcore and its interpretation by the High Court in the impugned order that the said Act of 2002 “provides for recovery of possession by non-adjudicatory process …” and went on to observe, at paragraph 34 of the report, that in Transcore “the question whether the secured creditor, in exercise of its rights under Section 13 of the Sarfaesi Act, can take over possession of the secured asset in possession of a lessee under a valid lease was not considered nor was the question whether there is anything in the Sarfaesi Act inconsistent with the right of a lessee to remain in possession of the secured asset under the Transfer of Property Act considered.” In pursuance of such opinion in the judgment, three different sets of orders were issued in respect of the three categories of matters: where the magistrate had passed orders under Section 14 of the Act for delivery of possession of the secured assets, such orders were set aside and the matters remitted “to pass fresh orders in accordance with this judgment and any other law that may be relevant after giving an opportunity to the appellants and the secured creditors”; where the requests under the Section 14 of the Act were still pending, a direction was issued to “consider” the matters and “decide” the same “in accordance with this judgment and any other law that may be relevant” after affording a hearing; and, where requests under Section 14 of the Act had been filed after the relevant matters were instituted in the Supreme Court or were to be filed, the magistrate “will decide” the same “in accordance with this judgment and any other law that may be relevant after giving an opportunity of hearing to the appellants and the secured creditors.” 80.
If the ratio decidendi of the judgment in Harshad Govardhan Sondagar is discerned by ignoring the applicability of amended Section 14 of the Act to the matters that were before the Supreme Court, two clear legal principles emerge: that a magistrate in receipt of a request under Section 14 of the Act in respect of a secured asset, which is in the possession of any person claiming as lessee under a valid lease which has not been determined under Section 111 of the Transfer of Property Act or on the volition of the lessee, cannot make an order for dispossession of the lessee from such secured asset without undertaking an adjudication, upon hearing, as to the validity of the lease and the legitimacy of the lessee to remain in possession thereof; and, that a lessee legitimately in possession of a secured asset under a valid lease, which has not been determined under Section 111 of the Transfer of Property Act or on the volition of such lessee, cannot, if dispossessed therefrom, obtain restoration of his possession under Section 17(3) of the Act. A corollary to the second limb, forming a part of the ratio decidendi in such judgment, is that notwithstanding adequate relief not being available to such a lessee who has suffered dispossession under Section 17(3) of the Act, such lessee cannot maintain a suit in respect thereof by reason of Section 34 of the Act; but such lessee will be entitled to a pre-dispossession adjudication before the magistrate under Section 14 of the Act, the order wherein may be questioned under Article 226 or Article 227 of the Constitution. 81. Another order, passed by a Division Bench of this court on February 5, 2015 in FMA No. 657 of 2015 (Central Bank of India v. Debasish Nandy), has been placed by the petitioners. V. Noble Kumar was noticed and several paragraphs of the report were quoted for the following view to be expressed in the context of the appeal arising from an order on a petition under Article 226 of the Constitution by which the sale notice issued by the secured creditor was quashed: “It is clear from the aforesaid declaration of law that only after possession is handed over to the secured creditor, the later (sic, latter) is entitled to invoke Rule 8 of the Security Interest Enforcement Rules, 2002 and issue the sale notice.” 82.
Finally on this aspect of the matter, there is the recent opinion of a single Bench of this court in Jawahar Singh. The judgment dealt with six petitions under Article 226 of the Constitution: four by borrowers and one by a secured creditor, challenging orders passed by the relevant magistrates under Section 14 of the Act; the sixth matter was a challenge to an order passed by the tribunal dismissing a non-borrower’s application under Section 17 of the Act. The several questions that were framed in the judgment appear from paragraphs 43, 44 and 51 thereof: “43. On the rival contentions advanced in course of hearing of these writ petitions, the following substantial questions of law emerge for decision: a. With the amendments introduced in section 14 of the Sarfaesi Act and the decision in Harshad Govardhan Sondagar (supra), does the process leading to orders passed by the CMM/DM for taking possession of the secured assets involve an adjudicatory process, meaning thereby putting the borrower/guarantor/occupier of the secured asset on notice, as distinguished from a non-adjudicatory process prevalent earlier? b. In an order passed under section 14(1) of the Sarfaesi Act not amenable to challenge in an application under section 17 in view of section 14(3) and the decision in Harshad Govardhan Sondagar (supra)? “44. One other question that would engage my consideration is, does section 13(4)(a) or any other provision of the Sarfaesi Act confer power on the authorised officer/secured creditor to take possession of a secured asset by dispossessing the borrower or any person in occupation thereof by force, should the borrower or occupant refuse to surrender possession or resist such attempt? Assuming the answer to be in the negative, who would be entitled to dispossess a borrower/an occupant from the secured asset and how?” “51. However, has the situation changed with the introduction of the amendments in section 14 or because of Harshad Govardhan Sondagar (supra)? It would be my endeavour to find an answer by analysing section 14 at the outset.” 83.
However, has the situation changed with the introduction of the amendments in section 14 or because of Harshad Govardhan Sondagar (supra)? It would be my endeavour to find an answer by analysing section 14 at the outset.” 83. The erudite opinion in Jawahar Singh dwelt on the essential requirements of a process of adjudication in the discharge of the judicial powers of the State and noticed high authorities on the meanings of “court”, “exercise of judicial power” and “judicial authority” to observe, at paragraph 71 thereof, that “The judicial power of the State for administration of justice to its subjects can exclusively be vested in courts or tribunals, which necessarily have to decide disputes between the parties that are brought before it according to accepted norms of judicial procedure.” The judgment discussed Harshad Govardhan Sondagar in great detail to distinguish the dictum therein on facts and read the same and its efficacy as follows in paragraphs 86 and 92 of the judgment: “86. Here, I am not concerned with any claim raised by a lessee who is in possession of a secured asset in pursuance of a lease of the nature that fell for consideration in Harshad Govardhan Sondagar (supra). The law laid down therein while dealing with the case of a lessee can hardly apply in case of a borrower in possession of the mortgaged property or a tenant/purchaser of a mortgaged property after creation of mortgage. Most importantly, I have not found any declaration of law in such decision that in every case while the CMM/DM is in seisin of a section 14 application, the borrower or the person in possession of a secured asset has to be put on notice.” “92. Kanaiyalal Lalchand Sachdev (supra) and V. Noble Kumar (supra) are authorities for the proposition that an order under Section 14 of the Sarfaesi Act is open to challenge under Section 17. There can be no warrant for an assumption that the Supreme Court in deciding the relevant civil appeals did not notice sub-section (3) of Section 14. It does, however, appear from Harshad Govardhan Sondagar (supra) that the parties did not place either Kanaiyalal Lalchand Sachdev (supra) or V. Noble Kumar (supra) before the Court for its consideration.” 84. The first question framed at paragraph 43 of the judgment in Jawahar Singh was answered therein in the negative at paragraph 87 thereof.
It does, however, appear from Harshad Govardhan Sondagar (supra) that the parties did not place either Kanaiyalal Lalchand Sachdev (supra) or V. Noble Kumar (supra) before the Court for its consideration.” 84. The first question framed at paragraph 43 of the judgment in Jawahar Singh was answered therein in the negative at paragraph 87 thereof. The second question at paragraph 43 was answered at paragraph 95 of the judgment by holding that “an order sub-section (1) of section 14 granting assistance to the secured creditor can be challenged before the relevant tribunal under section 17 of the Sarfaesi Act in accordance with law.” The question framed at paragraph 44 of the judgment was answered at paragraph 99 that if “the borrower or any person in occupation (of a secured asset) does not voluntarily surrender possession, the secured creditor would have no other option but to seek the assistance of the CMM/DM under section 14 in the manner prescribed.” The answer to the question framed at paragraph 51 of the judgment is found in paragraphs 86 and 92 thereof quoted above. 85. Though the parties did not find it relevant to refer to the interpretation of Section 17(3) of the said Act of 2002 in the judgment reported at AIR 2009 Cal 236 (Annapurna Paul v. State of West Bengal), paragraphs 20 and 21 of such report may be apposite: “20. Section 17(3) of the said Act empowers the tribunal to pass such order as it may consider appropriate and necessary in relation to any of the measures taken by the concerned secured creditor under Section 13(4) of the Act. Notwithstanding the previous passage in the sub-section that possession of the management of business or assets would be restored to the borrower if the secured creditor had taken any measure at variance with the provisions of the Act, it is the context in which such passage appears that is of importance.
Notwithstanding the previous passage in the sub-section that possession of the management of business or assets would be restored to the borrower if the secured creditor had taken any measure at variance with the provisions of the Act, it is the context in which such passage appears that is of importance. The restoration of the possession to the borrower would arise if the tribunal came to a conclusion that any of the measures taken by the secured creditor was not in accordance with the provisions of the said Act or 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.” The sub-section does not preclude restoration of the management of any business or restoration of the possession of any asset to an appellant who is not a borrower but against whose assets the secured creditor has proceeded erroneously. The reference to the borrower in the subsection may be justified since the overwhelming majority of appellants are expected to be borrowers and it would only be the odd third party against whose assets a bank or a financial institution proceeds under the said Act. “21. If the tribunal has the authority to decide the propriety of the measures taken by a secured creditor upon an appellant (sic, applicant) bringing a complaint before it, it would be absurd to suggest that irrespective of as to whether the appellant is the borrower in respect of the concerned transaction involving the secured creditor, the asset had to be returned to only the borrower or it was the borrower who was to be put in possession of the asset despite the non-borrower appellant having established its rights over such asset. The last limb of sub-section (3) is of widest amplitude and empowers the tribunal to pass such order as it may consider appropriate and necessary in relation to any of the measures taken by the secured creditor under Section 13(4) of the Act. There is no limitation apparent from the relevant words as to the authority of the tribunal to effectively deal with such a situation. The plain words of the sub-section are enough and no complex rule of statutory interpretation is necessary to be invoked for the understanding of the purport of the provision.” 86.
There is no limitation apparent from the relevant words as to the authority of the tribunal to effectively deal with such a situation. The plain words of the sub-section are enough and no complex rule of statutory interpretation is necessary to be invoked for the understanding of the purport of the provision.” 86. As to the doctrine of precedents, the binding effect thereof and what amounts to the ratio decidendi in a judgment, the parties have referred to several authorities, including some brought to their notice by the court. The judgments placed must first be seen before applying the rules of assessment on the basis thereof. 87. In the judgment reported (2011) 4 SCC 589 (Union of India v. S. K. Kapoor), it was held that it is “well settled that if a subsequent coordinate Bench of equal strength wants to take a different view, it can only refer the matter to a larger Bench, otherwise the prior decision of a coordinate Bench is binding on the subsequent Bench of equal strength.” 88. The judgment reported at (2003) 5 SCC 448 (State of Bihar v. Kalika Kuer) also dealt with per incuriam decisions by referring to authoritative texts and judgments. It quoted a previous Supreme Court dictum to the effect that “per incuriam appears to mean per ignoratium” and that a judgment is to be “avoided and ignored if it is rendered, in ignoratium of a statute or other binding authority” and that such principle “has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law.” 89. In the judgment reported at (2009) 8 SCC 646 (Nahar Industrial Enterprises Limited v. Hong Kong and Shanghai Banking Corporation), the Supreme Court noticed several decisions of that court to the effect that the “law laid down by this Court in a decision delivered by a Bench of larger strength is binding on any subsequent Bench of lesser or coequal strength.” 90. A Full Bench judgment of this court reported at AIR 1988 Cal I (Bholanath Karmakar v. Madanmohan Karmakar), which is no longer good law on the substantive legal issue decided therein, is instructive on one aspect of the doctrine of precedents as would appear from the following passages at paragraphs 14 and 16 of the report: “14.
A Full Bench judgment of this court reported at AIR 1988 Cal I (Bholanath Karmakar v. Madanmohan Karmakar), which is no longer good law on the substantive legal issue decided therein, is instructive on one aspect of the doctrine of precedents as would appear from the following passages at paragraphs 14 and 16 of the report: “14. … where there are contrary decisions of the Supreme Court rendered by Benches of equal strength, the High Court, in theory, being bound by each one, is, in effect, bound by none and is not necessarily obliged to follow the later in point of time, but may follow the one which, according to it, is better in point of law.” “16. Needless to say that it would be highly embarrassing for the High Court to declare one out of two or more decisions of the Supreme Court to be more reasonable implying thereby that the other or others is or are less reasonable. But if such a task falls upon the High Court because of irreconcilable contrary decisions of the Supreme Court emanating from Benches of co-ordinate jurisdiction, the task, however, uncomfortable, has got to be performed.” 91. It may be profitable in the present context to refer to the view expressed on such aspect in a recent Full Bench judgment reported at AIR 2015 Cal 112 (Prabhat Pan v. State of West Bengal) at paragraphs 37 and 38: “37. If a judgment of a Division Bench is placed before a single Judge of the same High Court, then the law recognised in such judgment is binding for all practical purposes unless the judgment is patently contrary to the applicable statute or it is contrary to a Supreme Court judgment. If, however, the Division Bench judgment notices a Supreme Court judgment and reads a legal issue discussed in the Supreme Court judgment to imply something that the Supreme Court decision clearly does not say, it is such interpretation which is binding on the single Judge of the same High Court and the single Judge has no room to interpret the Supreme Court judgment in any natural or ordinary way other than as read by the Division Bench. If a single Bench judgment of a High Court on a point of law is cited before a subsequent single Bench of the same court, it is binding on the later single Bench.
If a single Bench judgment of a High Court on a point of law is cited before a subsequent single Bench of the same court, it is binding on the later single Bench. The only recourse that the subsequent Judge may have, if he does not agree with the previous opinion, is to refer the matter to a larger Bench. The case is similar if a Division Bench judgment is cited before a subsequent Division Bench of the same court and the subsequent Division Bench does not agree with the view expressed in the previous one. “38. The matter is slightly different if a Supreme Court judgment is cited before a High Court. As to the binding nature of Supreme Court judgments, inter se, it is elementary that a Constitution Bench judgment will prevail over judgments of the Supreme Court rendered by lesser Benches. If, however, there are two Supreme Court judgments of varying import on the same point of law delivered by Benches of coordinate strength without the later judgment noticing the previous view, the High Court – be it a Division Bench or a Single Bench – has the option to choose the one more suited to the case at hand. However, the choice arises only in a situation where the subsequent Supreme Court judgment has not noticed or considered the previous view of the Supreme Court rendered by a Bench of the same strength. If the subsequent Supreme Court Bench of the same strength has noticed the previous view and has read it down, it is the subsequent view which becomes binding.” 92. Two English judgments, which have after been quoted with approval by the Supreme Court, may next be seen.
If the subsequent Supreme Court Bench of the same strength has noticed the previous view and has read it down, it is the subsequent view which becomes binding.” 92. Two English judgments, which have after been quoted with approval by the Supreme Court, may next be seen. In the opinion of the House of Lords reported at (1901) AC 495 (Quinn v. Leathem), the fundamental features of the doctrine of precedents was captured in the following words, which have been recognised time and again in this country: “Now, … there are two observations of a general character which I wish to make, and one is to repeat what I have very often said before, that every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all.” 93. The Court of Appeal verdict reported at LR (1944) KB 718 (Young v. Bristol Aeroplane Company, Limited), which was approved in appeal in the judgment reported at LR (1946) AC 163, has been referred to with approval by the Supreme Court in a number of cases, beginning with the Constitution Bench with the full complement of the then Supreme Court in the famous case of Bengal Immunity Co. Ltd v. State of Bihar [ (1955) 2 SCR 603 ]. The following passages are relevant for the present purpose: “In considering the question whether or not this court is bound by its previous decisions and those of courts of co-ordinate jurisdiction, it is necessary to distinguish four classes of case.
Ltd v. State of Bihar [ (1955) 2 SCR 603 ]. The following passages are relevant for the present purpose: “In considering the question whether or not this court is bound by its previous decisions and those of courts of co-ordinate jurisdiction, it is necessary to distinguish four classes of case. The first is that with which we are now concerned, namely, cases where this court finds itself confronted with one or more decisions of its own or of a court of co-ordinate jurisdiction which cover the question before it, and there is no conflicting decision of this court or of a court of co-ordinate jurisdiction. The second is where there is such a conflicting decision. The third is where this court comes to the conclusion that a previous decision, although not expressly overruled, cannot stand with a subsequent decision of the House of Lords. The fourth (a special case) is where this court comes to the conclusion that a previous decision was given per incuriam. In the second and third classes of case it is beyond question that the previous decision is open to examination. In the second class, the court is unquestionably entitled to choose between the two conflicting decisions. In the third class of case the court is merely giving effect to what it considers to have been a decision of the House of Lords by which it is bound. The fourth class requires more detailed examination and we will refer to it again later in this judgment.” “On a careful examination of the whole matter we have come to the clear conclusion that this court is bound to follow previous decisions of its own as well as those of courts of co-ordinate jurisdiction. The only exceptions to this rule (two of them apparent only) are those already mentioned which for convenience we here summarize : (i.) The court is entitled and bound to decide which of two conflicting decisions of its own it will follow. (ii.) The court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot, in its opinion, stand with a decision of the House of Lords. (iii.) The court is not bound to follow a decision of its own if it is satisfied that the decision was given per incuriam.” 94. Two other judgments reported at (2006) 1 SCC 275 (State of Orissa v. Md.
(iii.) The court is not bound to follow a decision of its own if it is satisfied that the decision was given per incuriam.” 94. Two other judgments reported at (2006) 1 SCC 275 (State of Orissa v. Md. Illiyas) and at (2013) 5 SCC 414 (Arasmeta Captive Power Company Private Limited v. Lafarge India Private Limited) have been carried by the secured creditor respondent on the same aspect. In the first, it was reiterated that the “enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent” and the “words used by Judges in their judgments are not to be read as if they are words in an Act of Parliament.” In the other, several judgments of the Supreme Court and of the English Courts were referred to and venerable textbooks quoted with approval to emphasise on what amounts to the ratio decidendi in a judgment and how the same has to be ascertained: “31. … The ratio decidendi is the underlying principle, namely, the general reasons or the general grounds upon which the decision is based on the test or abstract from the specific peculiarities of the particular case which gives rise to the decision. The ratio decidendi has to be ascertained by an analysis of the facts of the case and the process of reasoning involving the major premise consisting of a preexisting rule of law, either statutory or judge-made, and a minor premise consisting of the material facts of the case under immediate consideration. If is not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it. …” 95. On natural justice and the need to read such principle into a provision which is capable of affecting the rights of any person, the petitioners have placed several judgments.
If is not clear, it is not the duty of the court to spell it out with difficulty in order to be bound by it. …” 95. On natural justice and the need to read such principle into a provision which is capable of affecting the rights of any person, the petitioners have placed several judgments. In the first of them, reported at (1994) 5 SCC 267 (Dr Rash Lal Yadav v. State of Bihar), it was held that “unless the law expressly or by necessary implication excludes the application of the rule of natural justice, courts will read the said requirement in enactments that are silent and insist on its application even in cases of administrative action having civil consequences.” However, in that case where the Ordinance that preceded the Act had a provision for hearing but the Act excluded it, both the High Court and Supreme Court inferred that the Act had deliberately omitted the same. 96. In the judgment reported at (2008) 14 SCC 151 (Sahara India (Firm) v. Commissioner of Income Tax), the court held that the principles of natural justice would not only apply to judicial and quasi-judicial proceedings, but “even a purely administrative order which entails civil consequences, must be consistent with the rules of natural justice.” In that case, a post-decisional hearing provided under Section 142(3) of the Income Tax Act, 1961 was found not to comply with the requirement of natural justice since such post-decisional hearing did not encompass a challenge to the validity of the original order directing the special audit. The petitioners here have relied on both aspects of this judgment to suggest that the civil consequences that result from an order of a magistrate under Section 14 of the said Act of 2002 would warrant the exercise under such provision to comply with the rules of natural justice; more so, as Section 17(3) of the Act cannot afford adequate relief to non-borrowers as held in Harshad Govardhan Sondagar. 97.
97. In the judgment reported at (2007) 3 SCC 587 (State of Maharashtra v. Public Concern for Governance Trust), the same principle has been recognised as in Sahara India that “when an authority takes a decision which may have civil consequences and affects the rights of a person, the principles of natural justice would at once come into play.” In similar vein, the Constitution Bench judgment reported at (1978) 1 SCC 248 (Maneka Gandhi v. Union of India) has been placed for the proposition that the duty to give reasonable opportunity to be heard will be implied from the nature of the function to be performed by the authority which has the power to take punitive or damaging action. 98. The secured creditor respondent has referred to a single Bench judgment reported at AIR 1983 Bom 1 (Om Prakash Berlia v. Unit Trust of India) on the rules of evidence and the scope of the satisfaction of a magistrate within the meaning of the expression, “after satisfying the contents of the affidavit pass suitable orders”, in the second proviso to amended Section 14 of the said Act of 2002. The judgment makes the distinction between the proof of the contents of a document and the proof of the correctness of the contents thereof. The following passage at paragraph 12 of the report brings out the distinction: “12. The Act requires, first, the production of the original document. If the original document is not available, secondary evidence may be given. This is to prove what the document states. Upon this the document becomes admissible, except where it is signed or handwritten, wholly or in part. In such a case the second requirement is, under S. 67, that the signature and handwritten must be proved. Further, where the party tendering the document finds it necessary to prove the truth of its contents, that is, the truth of what it states, he must do so in the manner he would prove a relevant fact. …” 99. Three other judgments need also to be referred to for the purpose of the present assessment.
Further, where the party tendering the document finds it necessary to prove the truth of its contents, that is, the truth of what it states, he must do so in the manner he would prove a relevant fact. …” 99. Three other judgments need also to be referred to for the purpose of the present assessment. In the judgment reported at (2010) 8 SCC 24 (Afcons Infrastructure v. Cherian Verkay Construction), in the context of an obvious mistake in a statutory provision, it was observed that though legislative wisdom could not be replaced by a judge’s view, there is an exception to the general rule: “Where the words used in the statutory provision are vague and ambiguous or where the plain and normal meaning of its words or grammatical construction thereof would lead to confusion, absurdity, repugnancy with other provisions, the courts may, instead of adopting the plain and grammatical construction, use the interpretative tools to set right the situations, by adding or omitting or substituting the words in the statute.” The judgment instructs further that when “faced with an apparently defective provision in a statute, courts prefer to assume that the draftsman had committed a mistake rather than concluding that the legislature has deliberately introduced an absurd or irrational statutory provision.” But it cautions that a departure from the literal rule of plain and straight reading could only be made “in exceptional cases, where the anomalies make the literal compliance with a provision impossible, or absurd or so impractical as to defeat the very object of the provision.” In defining the rule of harmonious construction, the Constitution Bench held in the judgment reported at (1958) SCR 895 (Sri Venkataramana Devaru v. State of Mysore) that the “rule of construction is well settled that when there are in an enactment two provisions which cannot be reconciled with each other, they should be so interpreted that, if possible, effect could be given to both.” Again, in the judgment reported at (1964) 2 SCR 448 (Sirsilk Ltd v. Govt. Andhra Pradesh), the apparent conflict between mandatory provisions 17(1) and 18(1) of the Industrial Disputes Act, 1947 was resolved by resorting to the rule of harmonious construction.
Andhra Pradesh), the apparent conflict between mandatory provisions 17(1) and 18(1) of the Industrial Disputes Act, 1947 was resolved by resorting to the rule of harmonious construction. Section 17(1) of the 1947 Act mandates that the government publish every award of a labour tribunal within 30 days of its receipt and Section 17(2) of the such Act makes the award final on its publication. Section 18(1) of the Act, on the other hand, makes a settlement between the employer and its workmen binding on the parties to the agreement. The issue that arose was: where a settlement was reached between the employer and its workmen after the receipt of the award of the labour tribunal by the government, whether the government was still required to publish the award. The court held, notwithstanding the conflicting provisions, that since the settlement became effective from the time of the signing thereof, the industrial dispute came to an end thereupon and the award was rendered infructuous and, consequently, not required to be published by the government. 100. There is an unenviable task that has to be performed as the adjudication herein demands the same. This final aspect of the discussion has to be embarked upon by referring to the primacy of the law laid down by the Supreme Court as ordained by Article 141 of the Constitution. Since a High Court is bound by the pronouncement of law by the Supreme Court and even the obiter dicta of the Supreme Court command high respect, this onerous exercise has to be undertaken without the sycophancy and the servile obeisance that mark the contemporary approach in such regard. It must be said, in all humility, that the sentiments reflected in both V. Noble Kumar and Harshad Govardhan Sondagar have to be appreciated: in the former, the court saw through the many hurdles attempted to be set up by expensive arguments on behalf of defaulters; in the other, the approach was whether persons legitimately entitled to possess an immovable property could be bludgeoned out of possession in the wake of the measures made available to secured creditors under the Act without providing for any remedy for such persons who may be genuinely aggrieved thereby.
V. Noble Kumar did not notice the previous pronouncements on the matters in issue therein and Harshad Govardhan Sondagar distinguished Transcore on facts but did not refer to Kanaiyalal Lalchand Sachdev or discuss the dictum in Satyawati Tondon that restricted access to a High Court under Article 226 of the Constitution by any person affected or likely to be affected by an order passed on a request under Section 14 of the Act. Both V. Noble Kumar and Harshad Govardhan Sondagar referred to amended Section 14 of the Act when the same may not have been applicable and there is no finding in either that the amendment would apply to the orders passed under Section 14 of the Act prior to the amendment coming into effect or to requests pending with a magistrate under Section 14 as on the date of the 2013 Amendment becoming effective. On the other hand, there is no judgment of the Supreme Court before Harshad Govardhan Sondagar that makes a detailed analysis of Section 14 of the Act and Section 17(3) thereof, the interplay of the two provisions and the manner of their operation qua a class of persons who may be affected by orders passed under Section 14 of the Act and who may apply under Section 17 thereof but may apparently not be granted the relief that they may be entitled to. 101.
101. Without in any manner seeking to criticise any judgment, it must be noticed that in the context of the doctrine of election that came up for discussion in Transcore in course of dealing with the question whether it was permissible to proceed against a secured asset under the said Act of 2002 despite a claim pertaining thereto having been lodged with the tribunal under Section 19 of the 1993 Act, the court held that “the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent” and since “there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.” Though Transcore did not, in fact, notice or discuss Section 14 of the said Act of 2002, as rightly pointed out in Harshad Govardhan Sondagar, it is respectfully submitted that the entire edifice of the finding in Transcore is destroyed by its reading in Harshad Govardhan Sondagar. Again, Harshad Govardhan Sondagar is also contrary to Satyawati Tondon, particularly paragraphs 42 and 43 thereof set out above, though Satyawati Tondon did not expressly deal with the case of a pre-mortgage tenant in possession of the secured asset proceeded against. Further, in Jawahar Singh it was implied that Harshad Govardhan Sondagar is contrary to Kanaiyalal Lalchand Sachdev and V. Noble Kumar. 102. But V. Noble Kumar is itself contrary to Kanaiyalal Lalchand Sachdev insofar as V. Noble Kumar says at paragraph 28 of the report that recourse to Section 17 of the Act may be taken “only after losing possession of the secured asset” while Kanaiyalal Lalchand Sachdev held at paragraph 22 of the report 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.” Indeed, the authoritative pronouncement in V.Noble Kumar may be restricted to paragraphs 20 and 21 of the report. 103. The problem, really, is in the statute and in the interpretation of the applicability of the provisions thereof being limited to the lis without synchronising the interpretation of the one part with the others.
103. The problem, really, is in the statute and in the interpretation of the applicability of the provisions thereof being limited to the lis without synchronising the interpretation of the one part with the others. It is difficult to contemplate that a provision in a statute will operate as a non-adjudicatory process in the case of a particular class of persons or in some situations, but it will assume an adjudicatory character in respect of other classes of persons or situations. Such schizophrenic personality of a provision may not be permissible even if the provision expressly provided for it. Satyawati Tondon instructs that the measures taken under Section 13(4) of the said Act of 2002, including under Section 14 thereof, are capable of being challenged under Section 17 of the Act; Harshad Govardhan Sondagar makes Section 14 of the Act a full-fledged process of adjudication; and, V. Noble Kumar mandates that the magistrate under Section 14 of the Act will “examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction.” 104. The best approcach, in the circumstances, would be to attempt an act of synthesis by making a harmonious construction of the primary judgments that have been focused on in the foregoing discussion to glean the principles that have a bearing on whether a petition under Article 226 of the Constitution should be entertained on the merits of the action taken or orders passed under Section 14 of the Act at the behest of a person, other than the concerned secured creditor, who claims to be affected, or likely to be affected, thereby. The endeavour to summarise the legal position, which is necessary for answering the primary legal issue that has arisen herein, is based on the several judgments and orders pertaining to the said Act of 2002 noticed herein and by applying the interpretative tools as some of the other authorities referred to herein make available for the exercise.
The endeavour to summarise the legal position, which is necessary for answering the primary legal issue that has arisen herein, is based on the several judgments and orders pertaining to the said Act of 2002 noticed herein and by applying the interpretative tools as some of the other authorities referred to herein make available for the exercise. In particular, the conclusions drawn on the operation of the said Act of 2002 are based on the interpretation of the related provisions of the said Act of 2002 that precedes the discussion on the judicial authorities and, choronologically, the judgments rendered in Mardia Chemicals Limtied, Transcore, Ashok Saw Mill, Satyawati Tondon, Kanaiyalal Lalchand Sachdev, V. Noble Kumar, Harshad Govardhan Sondagar and Jawahar Singh, including how some of the earlier judgments have been read in the later judgments. The principles culled out, by ironing out the creases in the said Act of 2002 to make it workable, are: (i) The process under Section 14 of the Act is non-adjudicatory and administrative in nature. The appropriate magistrate has to ascertain whether the nine aspects referred to in the first proviso to Section 14(1) of the Act are covered by the declaration furnished in the affidavit filed by the authorised officer of the secured creditor. The magistrate cannot make any inquiry into the truth of the contents of the affidavit. The magistrate is not called upon to issue any notice to any person who is likely to be affected by any order passed or action taken under such provision. The magistrate should act promptly and ensure such assistance as may be proportionate to the requirement, but only upon checking that all nine clauses of the proviso are covered in the affidavit. (ii) A petition under Article 226 of the Constitution against anything doneor not done under Section 14 of the Act is maintainable; but such a petition should, ordinarily, not be received to be assessed on merits if filed by a person, other than the secured creditor, who claims to be affected or likely to be affected thereby. As a corollary, a petition under Article 226 of the Constitution can be entertained on merits against an order passed or any act done under Section 14 of the Act, if the complaint pertains to the lack of jurisdiction (primarily, on territorial considerations) or when the absurdity of that which is complained against is demonstrable.
As a corollary, a petition under Article 226 of the Constitution can be entertained on merits against an order passed or any act done under Section 14 of the Act, if the complaint pertains to the lack of jurisdiction (primarily, on territorial considerations) or when the absurdity of that which is complained against is demonstrable. A further corollary would be that a secured creditor may maintain a petition under Article 226 of the Constitution on merits if the complaint is of lack of, or the inadequacy of, the assistance rendered under Section 14 of the Act. (iii) Neither any order nor any assistance provided under Section 14 of theAct may be challenged by a borrower or any other person aggrieved thereby before any court or tribunal; but such person (other than a secured creditor) may apply under Section 17 of the Act in respect of the grievance by citing the secured creditor approaching a magistrate under Section 14 of the Act as a step taken in respect of a measure under Section 13(4) of the Act. (iv) Any overt step taken by a secured creditor to actuate any of themeasures under Section 13(4) of the Act would give rise to an immediate cause of action to a person who may be aggrieved thereby. Such aggrieved person may apply under Section 17 of the Act upon being aware of the overt step taken by the secured creditor, without having to wait for the completion of the relevant measure by the secured creditor. As to the nature of any order that may be passed on such application, whether immediately or otherwise, would depend on the facts of a particular case viewed in the context of the ultimate object of the Act to facilitate the access of the secured creditors to the secured assets without waiting for the completion of a process of adjudication.
As to the nature of any order that may be passed on such application, whether immediately or otherwise, would depend on the facts of a particular case viewed in the context of the ultimate object of the Act to facilitate the access of the secured creditors to the secured assets without waiting for the completion of a process of adjudication. In assessing the desirability of passing an order, the tribunal will defer to the statutory command in Section 34 of the Act that “no injunction shall be granted by any … authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act” to ascertain whether the act complained of is within the entitlement of the secured creditor “in pursuance of any power conferred by or under this Act.” (v) Any person aggrieved by any measure taken by a secured creditor(where the commencement of the taking of the measure is upon an overt step being taken by the secured creditor in such direction after the Section 13(3A) stage is completed) may obtain, and be granted, if entitled on facts, the reliefs of repossession or restitution or damages by the appropriate tribunal without there being a distinction, in such regard, between a borrower as defined in the Act and other persons aggrieved who may apply under Section 17 thereof. 105. In the light of the above, this petition under Article 226 of the Constitution is not entertained on the ground that there is an efficacious alternative remedy available to the petitioners under Section 17 of the said Act of 2002. WP No. 12424 (W) of 2015 is dismissed on such ground without going into the merits thereof. Since the first petitioner had invoked this extraordinary jurisdiction on its reading of the legal position on the basis of at least one judgment, the first petitioner will be entitled to claim before the appropriate tribunal that the period spent by the first petitioner in this court be excluded under Section 14 of the Limitation Act, 1963. However, it is made clear that it would be entirely for the relevant tribunal to consider the propriety of such claim and make a decision thereon. 106. There will be no order as to costs. 107.
However, it is made clear that it would be entirely for the relevant tribunal to consider the propriety of such claim and make a decision thereon. 106. There will be no order as to costs. 107. Urgent certified website copies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.