Research › Search › Judgment

Calcutta High Court · body

2019 DIGILAW 290 (CAL)

BULBULI KUNDU v. ALLAHABAD BANK

2019-02-28

DEBANGSU BASAK

body2019
JUDGMENT : DEBANGSU BASAK, J. 1. The petitioner is a purchaser of an immovable property in an auction conducted by a secured creditor under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (Act of 2002). The petitioner complains that, the petitioner has not been put into possession of the immovable property till date. He seeks suitable direction upon the Bank. 2. The State, Bank and the private respondents are represented. 3. Learned advocate for the Bank submits that, application made to the District Magistrate under Section 14 of the Act of 2014 is yet to be disposed of. Consequently, the bank is not in a position to make over the actual physical possession of the secured asset to the purchaser. He seeks a direction upon the District Magistrate to dispose of such application. He relies upon (ITC Limited Vs. Blue Coast Hotels Limited & Ors., (2018) 15 SCC 99 ) and (Hindon Forge Private Limited & Anr. Vs. State of Uttar Pradesh through District Magistrate, Ghaziabad & Anr., 2019 2 SCC 198 ) in support of his contentions. 4. Learned advocate for the State submits that, the bank having sold the immovable property concerned, it does not retain any security interest in respect of the secured asset so as to continue with the proceedings under Section 14 of the Act of 2002. 5. In the facts of the present case, the petitioner purchased the immovable property in an auction conducted under the Act of 2002. The petitioner is yet to be put into possession of the immovable property concerned. Apparently, the debtor is continuing to be in possession of the immovable property. The bank applied under Section 14 of the Act of 2002 before the concerned District Magistrate for police assistance. Such application is yet to considered and decided by the concerned District Magistrate. 6. The question whether, a secured creditor can continue to invoke the provisions of the Act of 2002, after the sale of the secured asset came up for consideration before the Supreme Court in ITC Limited (supra). It holds as follows: "46. Such application is yet to considered and decided by the concerned District Magistrate. 6. The question whether, a secured creditor can continue to invoke the provisions of the Act of 2002, after the sale of the secured asset came up for consideration before the Supreme Court in ITC Limited (supra). It holds as follows: "46. The question, however, whether the creditor could maintain an application of possession under Section 14 of the Act; even though it had taken over only symbolic possession before the sale of the property to the auction purchaser, depends on whether it remained a secured creditor after having done so. Section 2(l)(d) of the Act defines 'secured creditor' to mean a "banking company" having the meaning assigned to it in clause (c) of section 5 of the Banking Regulation Act, 1949; Section 2(1)(L) includes debts or receivables and any right or interest in the security whether full or part underlying such debt or receivables or any beneficial interest in property vide Sections 2(l)(i)(iv) & (v), Sub-section (6) of Section 13 posits that the transfer of the secured asset by the secured creditor shall vest in the transferee all the rights as if the transfer had been made by the owner of the secured asset. 47. In Mulla's the Transfer of Property Act:- "The section (Section 8) does not apply to court sales, for such sales effect a transfer by the operation of law. The principle of the section was, however, applied in a case decided by Madras High Court where a debt for unpaid purchase money on a sale of land was attached and sold, and the auction purchaser was held entitled to the charge which the vendor had under Section 55(4) (b) on the property in the hands of the buyer. The court, after observing that the present section did not apply to court sales, said: 7. ... The court, after observing that the present section did not apply to court sales, said: 7. ... The effect of applying s 8 is to strengthen the sale certificate by transferring the lien along with it." This Court observed in Abdul Aziz that a sale through court is different from a sale inter parties:- "What is sold at a court sale is the right, title and interest of the judgment debtor, and the extent of that interest is a mixed question of fact and law to be decided according to the circumstances of each particular case, and depends upon what the court intended to sell, and the purchaser intended to buy." We note that even though the entire right, title and interest were purported to have been transferred, all the rights, transfer and interest could not be said to have been transferred since the possession of the property was not transferred to creditor. The possession was retained by the debtor who continued to do business and receive rent from the rooms on the property and has in fact continued to do so till date. There is no doubt that after taking over the property from debtor, the creditor also acquired the right to receive the usufruct of the property i.e. the rent in this case. However, this was an interest in the property which was not at any point of time transferred to the auction purchaser." 7. ITC Limited (supra) was noted and discussed in Hindon Forge Private Limited (supra). It holds in paragraph 39 as follows: "39. This judgment also speaks of the taking over of symbolic possession under the SARFAESI Act. The judgment then goes on to discuss whether a creditor could maintain an application for possession under section 14 of the Act once it takes over symbolic possession before the sale of the property to the auction purchaser. The Court referred to various authorities and arrived at the conclusion that a secured creditor remains a secured creditor when only constructive or symbolic possession is given, as the entire interest in the property not having been passed on to the secured creditor in the first place, the secured creditor in turn could not pass on the entire interest in the property to the auction purchaser. In this behalf, it is important to refer to section 8 of the Transfer of Property Act, 1882 which states as follows: "8. In this behalf, it is important to refer to section 8 of the Transfer of Property Act, 1882 which states as follows: "8. Operation of transfer.- Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof. (emphasis supplied) Section 13(6) of the SARFAESI Act makes it clear that a different intention is so expressed by the Act, as any transfer of a secured asset after taking possession thereof, shall vest in the transferee all rights in the secured asset so transferred as if the transfer had been made by the owner of such secured asset. It is clear, therefore, that statutorily, under section 13(6), though only the lesser right of taking possession, constructive or physical, has taken place, yet the secured creditor may, by lease, sale or assignment, vest in the lessee or purchaser all rights in the secured asset as if the transfer had been made by the original owner of such secured asset. This aspect of the matter does not appear to have been noticed in the aforesaid judgment. The ultimate conclusion in the said judgment is, however, correct as a secured creditor remains a secured creditor even after possession is taken over as the fiction contained in section 13(6) does not convert the secured creditor into the owner of the asset, but merely vests complete title in the transferee of the asset once transfer takes place in accordance with rules 8 and 9 of the 2002 Rules." 8. In such circumstances, on the strength of ITC Limited (supra) and Hindon Forge Private Limited (supra), the bank is entitled to proceed with its application under Section 14 of the Act of 2002 to take actual physical possession of the secured asset concerned and make over such possession to the purchaser. The respondent no. 4 is directed to dispose of the application under Section 14 of the Act of 2002 filed by the Bank within a period of a fortnight from the date of its order. He will take into account the provisions of Section 14(1A) of the Act of 2002 while disposing of such application. 9. The respondent no. 4 is directed to dispose of the application under Section 14 of the Act of 2002 filed by the Bank within a period of a fortnight from the date of its order. He will take into account the provisions of Section 14(1A) of the Act of 2002 while disposing of such application. 9. Needless to say that, the secured creditor immediately upon receipt of possession of the secured asset under Section 14 of the Act of 2002 will make over such possession to the petitioner forthwith. 10. WP No. 12779(W) of 2018 is disposed of. No order as to costs. 11. Urgent certified website copies of this judgment and order, if applied for, be made available to the parties upon compliance of the requisite formalities.