IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HON'BLE THE CHIEF JUSTICE DR. MANJULA CHELLUR & THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN WEDNESDAY, THE 14TH DAY OF AUGUST 2013 23RD SRAVANA, 1935 W.A.No.1230 of 2013 --------------------------------------- AGAINST THE JUDGMENT IN W.P.(C).No.19503/2013, DATED 05 08-2013, OF HIGH COURT OF KERALA. ------------------ APPELLANTS/ PETITIONERS 1 AND 2:- ------------------------------------------------------- 1. RAFEEQUE, AGED 35 S/O.MAKKAR, KANNOTH HOUSE, EDATHALAP.O., ALUVA.
2. FATHIMA, W/O.MAKKAR, AGED 5 MAKKAR, KANNOTH HOUSE, EDATHALAP.O., ALUVA. BY ADV. SRI.FRANKLIN CHELLATH. RESPONDENTS/ RESPONDENTS 1 AND 2:- ------------------------------------------------------------- 1. UNION OF INDIA, REPRESENTED BY SECRETARY TO MINISTRY OF FINANCE, DEPARTMENT OF ECONOMICS AFFAIRS (BANKING DIVISION), CENTRAL SECRETARIAT, NEW DELHI.
2. CENTRAL BANK OF INDIA, REPRESENTED BY SENIOR MANAGER, MARKET ROAD, ALUVA”
101. R1 BY SRI.P.PARAMESWARAN NAIR,ASG OF INDIA. R2 BY STANDING COUNSEL SRI.GEORGE CHERIAN (THIRUVALLA) THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 14-08-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:- W.A.NO.1230 OF 201.APPENDIX APPELLANTS' ANNEXURE:- ---------------------------------------- ANNEXURE A - COPY OF APPLICATION SUBMITTED U/S.17(1) WITH EXHIBITS BEFORE THE DEBT RECOVERY TRIBUNAL, WHICH IS PENDING. RESPONDENT'S ANNEXURES:- -------------------------------------------- NIL. - true copy - Manjula Chellur, C.J.
& K.Vinod Chandran, J.
---------------------------------------- W.A.No.1230 of 2013 ----------------------------------------- Dated this, the 14th day of August, 2013 JUDGMENT K.Vinod Chandran,J.
The subject matter of the writ petition filed by the appellants, is the recovery proceedings initiated by the 2nd respondent-Bank against the residential house of the appellants under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "SARFAESI Act").
2. The undisputed fact is that the appellants availed of a housing loan from the respondent-Bank and constructed a residential building in the property owned by the appellants and subsequently default was committed in the loan account. The respondent-Bank hence, initiated proceedings under the SARFAESI Act for recovery of the arrears of loan, upon which the appellants challenged the proceedings initiated, before this Court. As is observed in the judgment of the learned Single Judge, the only question urged before the learned Single Judge was with respect to a portion of the property being sold off to discharge the liability and W.A.No.1230/2013 - 2 - the learned Single Judge, hence, relegated the appellants to the Authorized Officer under Rule 8(5) of the Security Interest (Enforcement) Rules, 2002. The learned Single Judge also issued a consequential direction to the Authorized Officer to consider the claim of the appellants within a period of one month, till which time the coercive proceedings were also kept in abeyance. It was specifically observed that no other contentions were urged and the disposal of the writ petition was also without prejudice to the remedies of the appellants under Section 17 of the SARFAESI Act.
3. The learned counsel for the appellants however, would contend before us that he had specifically sought for a declaration that the amendments made to Section 31(g) of the SARFAESI Act by Act 30/2004 with effect from 29.12.2004, "excluding any homestead and the land appurtenant thereto" is unconstitutional under Article 300-A of the Constitution of India. The second relief also prayed for declaring Section 14 of the SARFAESI Act as unconstitutional. It is the contention of the learned counsel that the learned Single Judge committed a gross travesty of law in not considering the above prayers.
4. We are not able to accept the contention of the learned counsel, since it has been observed by the learned Single Judge that no other grounds were urged at the time of hearing. W.A.No.1230/2013 - 3 - However, it is pertinent that neither does any of the contentions based on the constitutional challenge find a place in the judgment of the learned Single Judge; nor has the appellants thought it fit to file a review of the judgment passed by the learned Single Judge. However, since the learned counsel specifically urge the unconstitutionality of the above provisions before us on the strength of a decision of the Supreme Court reported in Chairman, Indore Vikas Pradhikaran v. Pure Industrial Coke & Chemicals Ltd. [(2007) 8 SCC 705]; we proceed to answer the same.
5. Section 31(g) before and after amendment, as also Section 14 of the SARFAESI Act are extracted hereunder: "S.31. Provisions of this Act not to apply in certain cases.- The provisions of this Act shall not apply to.- xxx xxx xxx Before amendment: (g) any properties not liable to attachment or sale under the first proviso to sub-section (1) of Section 60 of the Code of Civil Procedure, 1908 (5 of 1908); After amendment: (g) any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act) or sale under the first proviso to sub-section (1) of section 60 of the Code of Civil Procedure, 1908 (5 of 1908)". W.A.No.1230/2013 - 4 - "S.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. (2) For the purpose of securing compliance with the provisions of sub-section (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 done in pursuance of this section shall be called in question in any court or before any authority".
6. Before amendment clause (g) provided that any properties not liable to attachment or sale under Section 60(1) of W.A.No.1230/2013 - 5 - the Code of Civil Procedure, would be excluded from the sweep of the enactment. By the amendment what was brought in was the exclusion from the exemption of the properties specifically charged with the debt from such exemption. Hence, even if the property is not liable to attachment or sale, if there is a specific charge on the property; the exemption would be inapplicable. The contention of the learned counsel for the appellants is that only such exclusion brought in by Amendment Act 30/2004, a "homestead and the properties appurtenant thereto" was made liable to be proceeded under the said Act. We looked at the pre-amended provision and requested the counsel to tell us as to how a residential property is, by law, declared to be not liable to attachment. The learned counsel points out to Section 60 of the Code of Civil Procedure and the judgment of the Supreme Court above cited.
7. Section 60, by sub-clause (c) of the first proviso, exempts "houses and other buildings (with the materials and the sites thereof and the land immediately appurtenant thereto and necessary for their enjoyment) belonging to an agriculturist or a labourer or a domestic servant and occupied by him". We do not think that the residential house constructed by the appellants comes within the ambit of the said proviso, going by the plain words employed therein. W.A.No.1230/2013 - 6 - 8. The learned counsel then would urge that the term "homestead and the land appurtenant thereto" has been handpicked from the decision of the Supreme Court above referred, which decision has unequivocally declared that the right to "property, while ceasing to be a fundamental right would, however, be given express recognition as a legal right, provisions being made that no person shall be deprived of his property save in accordance with law" (sic). We have gone through the said judgment of the Supreme Court which considered the question whether a District Committee, constituted by an enactment intended at implementing Town Planning Schemes, while acting in exercise of its delegated power, can extend its area of operation beyond that to which it was confined by the notification which created the very District Committe. The facts of the case disclose that the persons who owned properties outside the area of jurisdiction of the District Committee were before the High Court claiming their right to deal with the property and enjoy the same by making construction in the property without reference to any development plan sought to be implemented by the District Committee; for the sole reason that their properties were outside the jurisdiction of the constituted District Committee. The District Committee issued orders restraining the owners from making any W.A.No.1230/2013 - 7 - such constructions, so as to ensure that the development plan sought to be implemented would not be hampered by any construction made by such property owners. While the public authority canvassed a greater public good, the individual property owners banked upon their rights to own and deal with property. The Hon'ble Judges at the outset declared that in such circumstance "the Courts must make an endeavour to strike a balance between public interest on the one hand and protection of a constitutional right to hold property, on the other" (sic). It was on the well settled premise that expropriatory legislation should be given a strict construction it was held that an owner of a land should ordinarily be entitled to use or develop the same for any purpose unless there exists certain regulation in a statute or a statutory rule. On the existence of such regulation, it was also held that the same has to be interpreted in such a manner causing least interference of such property. It was held: "Restrictions are made in larger public interest. Such restrictions indisputably must be reasonable ones".
9. As it was noticed in the said decision, the question considered was the reasonableness of an expropriatory legislation and the same cannot have any bearing on the case at hand. The W.A.No.1230/2013 - 8 - SARFAESI Act does not provide any restriction on the use of a property and does not at all interfere with the right of the owner of the property. What is intended is speedy recovery of dues in public interest and it is not a case in which any restriction is imposed statutorily to advance public interest. Modes of recovery have been provided to financial institutions, to recover defaulted amounts by proceeding against the security interest; which the borrower has willingly and voluntarily ceded to the Bank. As we noticed at the outset, the residential house, which is the subject matter of the above case, has been built on the finance availed by the appellants from the respondent-Bank. It is also admitted that the appellants had willingly and voluntarily created security interest in the property for satisfaction of the debt. The borrower cannot, at the stage of recovery, turn around and contend that a "homestead" is exempted from being proceeded against. Nor is there any exemption as such from proceeding against the residential property. We are unable to persuade ourselves that the Supreme Court decision cited by the learned counsel has any bearing on the issue at hand.
10. The further ground is the constitutionality of Section 14 of the SARFAESI Act. It is urged that Section 14 clothes the Metropolitan Magistrate with arbitrary power without any guidelines and without any remedy provided, by way of appeal, to the W.A.No.1230/2013 - 9 - borrower. We are constrained to notice that Section 17 provides an appellate remedy to the appellants, which they have failed to avail. The enforcement of security interest is provided under Section 13 of the SARFAESI Act and provides for enforcement of such security interest without intervention of the Court or Tribunal, in accordance with the provisions of the Act. Sub-section (2) of Section 13 refers to the requirement of a notice to be issued to the borrower and the time (60 days) within which the borrower should be called upon to discharge his full liabilities. Sub-section (3) refers to the details that are to be included in the notice and sub-section (3A) speaks of the consideration of any representation or objection and the communication of the conclusion arrived at by the secured creditor to the borrower. Sub-section (4), specifically in sub-clause (a) to (d), enumerates the measures by which the enforcement of security interest can be made. Sub-clause (a) of sub-section (4) of Section 13 clothes the secured creditor with the power and authority to take possession of the secured assets of the borrower. Section 14 provides an option to the secured creditor to approach the Chief Metropolitan Magistrate or the District Magistrate to render assistance in taking possession of the secured assets in pursuance of the action initiated under Section 13. Section 14 is an enabling provision, where the secured creditor on apprehension of any W.A.No.1230/2013 - 10 - obstruction or for any other reason, anticipates the requirement of any force to be employed in taking possession of such secured assets.
11. The Chief Metropolitan Magistrate or the District Magistrate, in such circumstance, is not involved in an adjudicatory process and as we noticed above, Section 14 merely enables the secured creditor to obtain an order of the jurisdictional Magistrate to aid the secured creditor in taking possession of the secured assets and enforcing the security interest created on that asset. Such assistance extended to the secured creditor by the jurisdictional Magistrate; by reason of sub-section (3) to Section 14 is not entitled to be called in question in any Court or before any authority. The legislature, in its wisdom, has provided so, since otherwise it would lead to the proceedings under the SARFAESI Act being challenged in two different proceedings. However, the restriction provided by sub-section (3) to Section 14, does not at all enure to the benefit of the borrower to contend that the total absence of an appellate or revisional remedy makes the provision itself unconstitutional. As has been found by us, Section 14 is an enabling provision in the nature of assistance extended to the secured creditor to bring to culmination the proceedings issued under Section 13(4). Any action taken under Section 13(4) is appealable under Section 17 of the W.A.No.1230/2013 - 11 - Act and in the event of such appeal being allowed, necessarily the order of the jurisdictional Magistrate issued under Section 14 will not survive thereafter. On the strength of the above reasoning, we are of the opinion that the challenge on the ground of unconstitutionality made against sub-clause (g) of Section 32 as also Section 14 is devoid of merit.
12. In the above circumstances, we are of the opinion that none of the grounds urged by the appellants are sustainable in law and we concur with the judgment of the learned Single Judge dismissing their writ petition and confirm the same with the additional reasons as aforesaid. Writ Appeal is dismissed. No costs. Sd/- Manjula Chellur, Chief Justice Sd/- K.Vinod Chandran, Judge. vku/- ( true copy )