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2023 DIGILAW 33 (ALL)

Suraj Kumar Singh v. State Of U. P.

2023-01-04

SUNITA AGARWAL, VIPIN CHANDRA DIXIT

body2023
JUDGMENT : 1. Heard Sri Krishna Mohan Asthana, learned counsel appearing for the Bank, Sri Dhiraj Singh learned counsel has put in appearance on behalf of the borrower, Ms. Smriti Gupta, Advocate holding brief of Sri Prashant Kumar Pandey learned counsel for the petitioner appearing in the connected matter, Sri Nimai Das, learned Additional Chief Standing Counsel and Sri Apurva Hajela learned Standing Counsel for the State respondents, on the issue of the charges demanded by the police department for providing police force to hand over the physical possession of the secured asset to the Bank in accordance with sub-section (2) of Section 14 of SARFAESI Act, 2002. 2. Short question arises for consideration in three connected writ petitions is with regard to the demand of charges for the use of police force by the police department as communicated by the District Magistrate/Additional City Magistrate/Additional District Magistrate (Finance and Revenue), for the purpose of taking physical possession of the secured asset, to forward the same to the secured creditor/bank under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred as SARFAESI Act, 2002). The petitioners in this group of writ petitions are the auction purchasers and the banking institutions who are seeking writ of mandamus commanding the State authorities namely the District Magistrate or the Authorized Officer, as the case may be, to provide assistance in taking physical possession of secured assets by providing police protection under Section 14 of the SARFAESI ACT' 2002. The petitioner are disputing the charges for the use of police force and other incidental charges, as demanded by the District Magistrate/Authorized Officer, the Superintendent of Police for taking appropriate steps under Section 14 (2) of the SARFAESI ACT' 2002. 3. In the counter affidavit filed on behalf of the Senior Superintendent of Police, Agra and the Superintendent of Police, Agra in one of the connected writ petition No.10306 of 2002, a categorical stand has been taken on a letter of request dated 04.10.2021 written by the petitioner bank therein to the Senior Superintendent of Police, Agra requesting to provide necessary police force in order to maintain law and order situation that requisite expenses for providing police force has to be deposited by the Secured Creditor/Bank. A report was sought therein by the S.S.P. Agra vide his letter dated 12.10.2021 from the In-charge Inspector, Police Station, New Agra, Agra and the bank was informed on 11.11.2021 to deposit necessary expenses in the treasury for providing police force. The petitioner bank therein, however, did not deposit the requisite money for providing necessary police force, as a result of which, the order under Section 14 could not be complied with. The respondent Nos.6 and 7, the officers of the police department have asserted that on the demand of police force by government, semi government, personal, community institutions, commercial institutions, bank, body, etc, under Para 198 of the Police Regulation and Section 13 of the Police Act' 1861 expenses/charges for providing police force has to be obtained from them. Reference has also been made to the letter dated 26.03.2019 of the Finance Controller, U.P. Police Headquarter issued on the basis of the Government orders dated 09.05.2014 and 22.12.2016 that the expenses incurred by the police department in providing police force on the demand of gunner, shadow and guard from the police department by private institutions, commercial institutions, bank, body etc, shall be the fixed on the revised pay computed on the basis of the matrix. 4. A categorical stand has, thus, been taken by the police department that at the time of taking physical possession of the secured asset under Section 14 (1) and (2), if there is a need for the police force, the demand of charges, expenses for police force as per the computation made in the letters/circular dated 26.03.2019 issued by the Finance Controller, U.P. Police Headquarter has to be made. 5. It was argued on behalf of the State respondents based on the stand taken in the counter affidavit of respondent Nos.6 & 7, (the police department) that to facilitate the delivery of possession of the secured assets to the secured creditor, if need be for use of necessary police force in the opinion of the Authorized Officer under Sub-section (2) of Section 14, the expenditure for providing police force has to be borne by the secured creditor/Bank, who in turn can realize the cost, charges and expenses incurred by it from the borrower in accordance with Sub-section (7) of Section 13 of the SARFAESI ACT' 2002. The demand, thus, is sought to be justified with the aid of the provision of the Police Act' 1961 and the Police Regulations framed thereunder. 6. In rebuttal, it is vehemently argued by Sri K.M. Asthana learned counsel appearing on behalf of the bank/secured creditor that the SARFAESI ACT' 2002 is a complete code in itself, which has been enacted to secure the interest of the financial institution/bank. The Statement of Object and reasons of the SARFAESI ACT' 2002 shows that the SARFAESI ACT' 2002 was enforced to enable banks and financial institutions to realize long term asset, and improve recovery by exercising powers to take possession of securities, sell them and reduce non performing assets by adopting measures of recovery or reconstruction. Section 14 of the SARFAESI ACT' 2002 casts a mandate on the District Magistrate/Chief Metropolitan Magistrate or the Authorized Controller, as the case may be, within whose jurisdiction any such secured assets is situated, to take possession of such assets and forward the same to the secured creditor. The first and second proviso to sub section (1) of Section 14 provide timeline of 30 days and for reasons to be recorded in writing beyond 30 days not exceeding in aggregate 60 days, to pass a suitable order for the purpose of taking possession of the secured asset on the application moved by the secured creditor. Sub section (2) of Section 14 further cast a duty on the DM/CMM/Authorized Officer to take such steps or use such force or cause to be taken such steps or cause to be used such force, as in his opinion may be necessary, for the purpose of securing compliance with the provisions of sub-section (1) of Section 14. 7. The submission is that the entire scheme of Section 14 casts a positive mandate upon the district administrative authority to take possession of the secured assets and forward the same to the secured creditor/bank, by the use of force if necessary. In this scheme of the Act, there is no provision for charging any expenses for the use of police force. The banks/secured creditor cannot be asked to provide for charges for the use of force as may be necessary, which is not contemplated under the scheme of the SARFAESI Act' 2002. In this scheme of the Act, there is no provision for charging any expenses for the use of police force. The banks/secured creditor cannot be asked to provide for charges for the use of force as may be necessary, which is not contemplated under the scheme of the SARFAESI Act' 2002. Rather the duty is of the DM/CMM/Authorized Officer to ensure compliance with the provision of sub-section (1) which obliged him to take possession of the secured assets and forward such assets to the bank. 8. The submission is that the SARFAESI Act' 2002 has been enacted to augment the process of recovery and Section 14 has been enacted to assist the bank/secured creditor to take physical possession of the secured assets though symbolic possession has already been taken by the secured creditor with the issuance of the notice under Section 13(4) of the SARFAESI Act' 2002 to the borrower, who fails to discharge his liability in full within the period specified in sub section (2) of Section 13. It was argued that the Apex Court in the case of M/s. Transcore vs Union Of India & Anr, (2008) 1 SCC 125 , has held that there is no dichotomy between the symbolic possession and actual physical possession within the scheme of Section 13 (4) and Section 14 as contained in Chapter III of the SARFAESI Act' 2002. At no point of time, the secured creditor is required to write to the police authority to provide police force as the duty is casts upon the DM/CMM or the Authorized Officer to take such steps or cause to be taken such steps as mandated by sub-section (2) of Section 14 for the purpose of securing compliance with the provisions of sub-section (1) of Section 14. 9. It was argued that in any case, neither the Police Act nor the provision of the Police Regulations can be applied to demand any charges or expenses from the secured creditor/bank for the use of police force, to take possession of the secured asset and forward it to the bank/secured creditor in accordance with sub section (1) of Section 14. In fact, a statutory duty and obligation is cast upon the State authorities in the scheme of Section 14 of the SARFAESI Act' 2002 and they are to act as agent of the bank to assist the bank to obtain possession. In fact, a statutory duty and obligation is cast upon the State authorities in the scheme of Section 14 of the SARFAESI Act' 2002 and they are to act as agent of the bank to assist the bank to obtain possession. In light of the said statutory obligation coupled with the mandate of the statutory period provided for completion of the proceedings under Section 14, no expenses/charges can be realized from the secured creditor/bank and since no such charges can be realized from the bank, it in turn cannot recover the cost/expenses from the borrower as per sub section (7) of Section 13 of the SARFAESI Act' 2002, as submitted by the counsel for the State respondents. 10. Having considered the contentions of the learned counsels for the rival parties, at first, we are required to examine the scheme of the Enforcement of Security Interest as contained in Chapter III of the SARFAESI Act' 2002. Sub section (2) of Section 13 provides that where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any installment thereof, and his account in respect of such debt is classified by the secured creditor as Non-performing asset, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights conferred on it under sub-section (4) of Section 13. 11. On receipt of the notice under Sub section (2) of Section 13, the borrower has been given a right to be heard/opportunity to raise his objection/representation to the secured creditor. The secured creditor, in turn, is obliged to decide the objection and communicate its decision if it comes to the conclusion that such representation or objection is not acceptable or tenable. Only after such communication, in case, the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to any of the measures provided in sub-section (4) to recover his secured debt. Only after such communication, in case, the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to any of the measures provided in sub-section (4) to recover his secured debt. One of the measures as provided in clause (a) of sub Section (4) is to take possession of the secured asset of the borrower including the right to transfer the same by way of lease, assignment or sale for realising the secured debt. Sub-section (5), (5A), (5B), (5C) and (6) of Section 13 provide for sale of an immovable property as secured assets or transfer of the same after taking possession thereof or take over of management under sub-section (4) by the secured creditor. Subsection (7) of Section 13 further provides that all costs, charges and expenses which, in the opinion of the secured creditor, have been properly incurred by him or any expenses incidental thereto, where any action has been taken against a borrower under the provision of sub-section (4), shall be recoverable from the borrower and such money which is received by the secured creditor shall, be held by him in trust, to be applied, firstly, in payment of such costs, charges and expenses and secondly, in discharge of the dues of the secured creditor. 12. Section 14 of the SARFAESI Act' 2002, as held by this Court in the case of Shipra Hotels Limited & another vs. State of U.P. & Others, Writ Petition No.22594 of 2022, decided on 25.11.2022 is an extension of the measures taken by the secured creditor under sub-section (4) of Section 13, i.e. to take possession of the secured asset, on the resistance of the borrower to the Authorized officer of the Bank/Secured Creditor in getting physical possession of the secured asset or failure to surrender the possession on his to the secured creditor. A careful reading of the language of sub-section (1) of Section 14 makes it clear that Section 14 is not an independent provision rather it has been enacted to provide aid to the bank/secured creditor to take possession of the secured assets of the borrower, in furtherance of the measures taken by it under sub-section (4) of Section 13 to recover his secured debt. The CMM/DM/Authorized Officer, thus, assists the secured creditor in taking physical possession or control of any such secured assets, on a request in writing, made by the secured creditor, which has to be accompanied by an affidavit of the Authorized Officer of the secured creditor in accordance with the first proviso to sub-section (1) of Section 14. 13. As regards the second and third proviso to subsection (1) of Section 14 which provide time line for passing suitable order for the purpose of taking possession of the secured assets, which is 30 days extended upto 60 days (for the reasons beyond his control to be recorded in writing), they have been enacted to speed up or augment the process of recovery of the secured debt by taking possession or control of the secured assets and transferring it in the manner prescribed by law. Subsection (2) of Section 14 further provides that the DM/CMM/Authorized Officer, for the purpose of securing compliance with the provision of sub-section (1) of Section 14, i.e. to ensure completion of the process of taking physical possession of the secured asset and forwarding the said asset to the secured creditor may use or cause to be used force, take or cause to be taken such steps as in his opinion may be necessary. The purpose of this provision is to aid the secured creditor to realize its secured debt by enforcement of security interest created in its favour, without the intervention of the Court or tribunal. 14. The sub-section (2) of section 14 is, thus, an enabling provision providing ample powers to the DM/CMM/Authorized Officer to ensure compliance of the provisions of Sub-section of Section 14 by use of such force where it becomes necessary. Sub-section (2) of Section 14, however, cannot be read in the manner as suggested by the learned counsel for the bank/secured creditor to cast any statutory obligation or duty upon the DM/CMM/Authorized Officer to use or cause to be used police force, rather in his discretion when required he can use such force as may be necessary to meet the resistance put forth by the borrower in taking physical possession of the secured asset i.e. to maintain law and order situation on the spot. In any case, the statutory obligation casts upon the DM/CMM/Authorized Officer under Section 14 of the Act' 2002 is to assist the secured creditor to take physical possession of the secured assets for recovery of its secured debt. 15. The fact that Section 14 does not provide for payment/realization of any charges or expenses incurred by the Magistrate in getting police aid is of no consequence, in as much as, sub-section (7) of Section 13 takes care of such a situation. Section 13 (7) contained in the same Chapter III as that of the Section 14 clearly provides that where any action has been taken against the borrower under the provision of subsection (4) of Section 13, all cost, charges and expenses incurred by the secured creditor or any expenses incidental thereto, are recoverable from the borrower and the money which is received by the secured creditor shall be utilized firstly in payment of such cost, charges and expenses, before discharging its own dues. 16. The procedure for taking physical possession of the secured assets prescribed in Section 14, on the request in writing of the secured creditor, is only in aid of the measures initiated by the secured creditor under sub-section (4) of Section 13, being purely executionary in nature as per the decision of the Apex Court in M/s R.D. Jain & Co. Vs. Capital First Ltd. & others, Civil Appeal No.175 of 2022. The expenses incurred by the bank or any expenses incidental to the action taken under the provision of sub-section (4) of Section 13 against the borrower, are, thus, recoverable from the borrower in accordance with sub-section (7) of Section 13. The cost, charges and expenses incurred by the secured creditor in taking action under the provision of sub-section (4) or any expenses incidental thereto, as required to be incurred for use of police force by the DM/CMM/Authorized Officer as per sub-section (2) of Section 14, are recoverable from the borrower and the secured creditor is obliged to pay such charges to the concerned department. 17. 17. The first submission of the learned counsel for the secured creditor/Bank that Section 14 of the Act' 2002 mandates the DM/CMM/Authorised Officer to use police force, free of charge and since it does not provide for recovery of any such expenses which may be demanded by the police department in providing police force any demand for the expenses incurred by the DM/CMM in use of police force is not covered under any of the charging provisions of the Act' 2002 is, thus, liable to be turned down being misconceived. 18. As regards the demand raised by the police department for providing police force with the aid of the provisions of the Police Act and the Police Regulations framed thereunder, Section 13 of the Police Act' 1861 is relevant to be noted hereunder:- “13. Additional police-officers employed at cost of individuals.— It shall be lawful for the (Director-General-cum-Inspector General or Inspector General) of Police or any Deputy Inspector-General or Assistant Inspector-General, or the District Superintendent, subject to the general direction of the Magistrate of the district, on the application of any person showing the necessity thereof, to depute any additional number of police-officers to keep the peace at any place within the general police-district and for such time as shall be deemed proper. Such force shall be exclusively under the orders of the District Superintendent, and shall be at the charge of the person making the application.” 19. Section 13 of the Police Act authorizes the Director General cum Inspector General of the police or any other officer mentioned therein to frame such order and rules as he shall deem expedient relating to the organization, classification and distribution of such police force and the particular service to be performed by them. Para 198 of the U.P. Police Regulations provides the manner of dealing with the request received from the officer of any other department of government for the supply of guards. It provides that such supply can be made without unduly weakening the reserve and the strength of the guard should be determined by the Superintendent with reference to the departmental rules. 20. It provides that such supply can be made without unduly weakening the reserve and the strength of the guard should be determined by the Superintendent with reference to the departmental rules. 20. As regards the charges for supply of guards to the other department, the Superintendent of Police is guided by the instructions in clause (a) & (b) of para 198 which exclude such charges for supply to other departments as enumerated therein (in the sub clause to clause (a) & (b)). Section 1 of the Police Act' 1861 defines the word “persons” to include a company or corporation. The government order dated 14.10.1992 provided the rates for the expenditure incurred by the police department in providing police guards or recovery of expenses incurred by it under Section 13 & 15 of the Police Act' 1861 and para 198 of the Police Regulations. The rates as prescribed therein have been revised by the orders/circulars issued by the Finance Controller, U.P. Police Headquarter, Lucknow, the last being the government order dated 04.04.2022 which provides the rates for providing police guard to VIP/VVIP and Bank etc. 21. The government order dated 14.02.2022 as relied by the learned counsel for the bank/secured creditor is addressed to the Police Commissioner/Senior Superintendent of Police/Superintendent of Police in the State of U.P. directing them to provide for adequate police force as may be necessary and required by the District Magistrate so as to effectively dispose of the pending matters under Section 14 of the Act' 2002. It is in the nature of a warning given to the police department not to dilly-dallying the matters as and when such requirement is intimated by the District Magistrate. In any case, the government order dated 14.02.2022 cannot be treated as a mandate to provide police force free of cost or without demand of expenses, if required in ensuring compliance of sub-section (1) of Section 14. 22. It may be clarified that Section 14 empowers the DM/CMM/Authorized Officer to take such steps as may be necessary to aid the bank in taking possession of the secured assets, i.e. to complete the steps or measures taken by it under sub-section (4) of Section 13 to recover his secured debts. 22. It may be clarified that Section 14 empowers the DM/CMM/Authorized Officer to take such steps as may be necessary to aid the bank in taking possession of the secured assets, i.e. to complete the steps or measures taken by it under sub-section (4) of Section 13 to recover his secured debts. The banking/finance company defined in Section 2(c) (d), (ga) & (m) which provide financial assistance (within the meaning of Section 2(k)) cannot claim to be the local government or any of the department of the State or Central Government so as to seek exclusion under Para 198 of the Police Regulations. Chapter XVIII of the Police Regulations deals with special guards and additional police and provide for adequate supply of additional police force on the levy of sum required as the Commissioner of the Division and the Inspector General of police may consider. Para 198 empowers the Superintendent of Police to supply police force without unduly weakening the reserve, to determine the strength at his own discretion and to determine whether the guards should be charged for or not and in case of any doubt to ascertain the same from the Inspector General. 23. Under the Scheme of the Police Act and U.P. Police Regulations, police force required to be used for any other purpose than for which the force is constituted, on the request of a private person including company or corporation, has to be provided on payment of expenses or charges. To ensure compliance with sub-section (1) of Section 14 of the Act' 2002 i.e. to aid the secured creditor to take possession of the secured assets, the police force cannot be provided free of cost. For the use of State machinery, the secured creditor/bank is required to deposit costs or expenses demanded by the police department as communicated by the DM/CMM/Authorized Officer, as the case may be. As far as the interest of the secured creditor/bank is concerned, the same is protected under the SARFAESI Act' 2002 as the costs/expenses demanded by the police department are not to be borne by the secured creditor/bank and it is free to recover the said charges/expenses incidental to the action taken under the provision of sub-section (7) of Section 13, from the borrower. The secured creditor/bank cannot insists to provide police force which is primarily constituted for maintaining law and order situation, free of cost for any resistance putforth by the borrower to the Authorized Officer of the secured creditor, to take physical possession of the secured assets, for enforcement of the security interest. 24. In other words, the secured creditor/bank cannot step into the shoes of the borrower to claim that the borrower does not have to bear the expenses incidental to the action taken by the secured creditor/bank in recovery of his secured debts by taking action under the provision of sub-section (4) of Section 13. 25. We do not find any substance in the submission of the learned counsel for the secured creditor/bank in opposing the demand made by the police department for providing necessary police force as required by the DM/CMM/Authorized Officer to ensure compliance of sub-section (1) of Section 14 as per the provision of sub-section (2) of Section 14 of the Act' 2002. The secured creditor/bank is always at liberty to recover the cost/expenses incurred by it from the borrower by adjustment of said costs, charges and expenses at the time of recovery of his secured debts while disposing of the immovable property/secured asset by way of lease, assignment or sale. The only requirement of sub-section (7) of Section 13 is that such costs, charges and expenses have to be first paid to the concerned department out of the money which is received by the secured creditor recoverable from the borrower, before discharge of its own dues. 26. In view of the above discussion made from all angles, we do not find any substance in the submission of the learned counsel for the secured creditor/bank that the secured creditor/bank cannot be asked to deposit the cost/charges for use of police force, for taking possession of the secured assets by the DM/CMM/Authorised Officer to forward such assets to the secured creditor/bank. The stand taken by the police department that the secured creditor/bank is obliged to deposit the expenses for use of police force in the treasury on the requirement communicated by the DM/CMM/Authorized Officer, cannot be said to be illegal. 27. The stand taken by the police department that the secured creditor/bank is obliged to deposit the expenses for use of police force in the treasury on the requirement communicated by the DM/CMM/Authorized Officer, cannot be said to be illegal. 27. It is held that the secured creditor/Bank is under obligation to deposit the costs/expenses demanded by the DM/CMM/Authorised Officer for use of police force at the time of demand, which it may in turn be realised/recoverable from the borrower. 28. The writ petitions are accordingly, disposed of with the direction that the CMM/DM/Authorized Officer shall co-ordinate with the Senior Superintendent of Police/Superintendent of Police, in individual cases, to compute the cost of use of police force, as may be necessary, in accordance with sub-section (2) of Section 14, for the purpose of securing compliance with the provision of sub-section (1) of Section 14, i.e. to take possession of the secured assets to forward such asset to the secured creditor. The costs so computed shall be duly communicated to the secured creditor by the CMM/DM/Authorized Officer and on the deposit of the said costs/expenses in the concerned treasury by the secured creditor, such force shall be provided by the SSP/SP of the police concerned immediately, so that the possession of the secured assets can be taken by the CMM/DM/Authorized Officer in the spirit of Section 14 of the Act' 2002. 29. In any case, the concerned officer authorized to take action under Section 14 of the Act' 2002 is required to take a decision in a time bound manner to ensure compliance of the provision of Section 14 (1) of the Act' 2003 and there shall be no delay or slackness on his part in discharge of his duties/obligation under the Act. 30. The secured creditor/bank’s on the other hand, is required to discharge its obligation of the deposit of the charges/ expenses incidental to the action taken by it under subsection (4) of Section 13, i.e. for the use of police force to secure possession of the secured assets, which is recoverable from the borrower. 30. The secured creditor/bank’s on the other hand, is required to discharge its obligation of the deposit of the charges/ expenses incidental to the action taken by it under subsection (4) of Section 13, i.e. for the use of police force to secure possession of the secured assets, which is recoverable from the borrower. Any denial or slackness on the part of the secured creditor/bank in complying with the direction of the DM/CMM or the officer authorized under Section 14 of the Act' 2002 will relieve such officer of his obligation under Section 14(1) of the Act' 2002, i.e. there shall be no obligation for use of police force under sub-section (2) of Section 14, in case the secured creditor/bank refuses to deposit the costs/expenses for providing such police force as computed by the SSP/SP/concerned and communicated by the DM/CMM/Authorised Officer, to the Secured Creditor. 31. Disposed of accordingly.