ORDER
G. Rohini, J.
1. This writ petition is filed seeking a declaration that the Auction Notice dated 16-1-2006 issued by the 1st respondent Bank proposing to sell the properties belonging to the petitioner under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is arbitrary and illegal.
2. It is not in dispute that the writ petitioner having availed a loan from the 1st respondent Bank for establishment of a poultry farm, by mortgaging certain immovable properties as security, committed default in discharging the same and consequently the account was classified as non-performing asset. Thereafter, the respondents while invoking the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the Securitisation Act, 2002'), issued a notice dated 13-9-2005 under Section 13(2) calling upon the petitioner to pay the amount due within 60 days. Since the petitioner failed to comply with the same, the respondents in exercise of powers under Section 13(4) of the Act had taken possession of the secured assets on 28-9-2005 and 3-12-2005 and proposed to sell the same under the impugned Notice by inviting tenders.
3. It is to be noted that by that time O.A. No. 204 of 2005 filed by the 1st respondent Bank against the petitioner for recovery of the amounts due under the very same loan account was pending in the Debts Recovery Tribunal, Hyderabad.
4. The impugned sale notice is challenged in this writ petition primarily on the ground that the action of the respondents in invoking parallel remedies under the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for short, 'RDB Act, 1993') and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, 'the Securitisation Act, 2002') simultaneously is impermissible and illegal. The further contention is that the mortgaged properties, being agricultural lands, are exempted from the provisions of the Act under Section 31(i) of the Securitisation Act, 2002 and therefore they cannot be brought to sale under the impugned notice.
5. In the counter-affidavit filed on behalf of the respondents, the plea of the writ petitioner that the mortgaged properties are agricultural lands and are exempted from the purview of the Securitisation Act, 2002 has been denied. It is stated that the petitioner has been doing poultry business on the said lands and no agricultural activity is undertaken and therefore the provisions of Section 31 of the Act have no application. It is further stated that the outstanding dues as on 31-3-2002 was Rs. 138.47 lakhs and therefore the offer of Rs. 94.84 lakhs under the One Time Settlement (OTS) made by the petitioner was not accepted. Moreover, as per the norms of OTS scheme, the respondent cannot accept less than Rs. 94.84 lakhs. Hence, the meagre amount of Rs. 55 lakhs offered by the petitioner could not be accepted and the same was informed to the petitioner by letter dated 11-7-2002 calling upon the petitioner to submit his revised offer. However, the petitioner came forward with an offer to pay a sum of Rs. 72 lakhs through his letter dated 28-8-2002. Hence, the same was not accepted. Thus, in spite of ample opportunity given to settle under OTS, the petitioner failed to avail the same. Since the account was classified as non-performing asset and no payment was forthcoming, the respondent Bank had invoked the provisions of the Securitisation Act for realisation of the dues. Subsequently O.A. No. 204 of 2005 was filed in the Debts Recovery Tribunal, Hyderabad as the loan was getting time-barred.
6. I have heard the learned Counsel appearing for both the parties.
7. As can be seen from the material on record, it is not in dispute that the loan account of the petitioner has been classified as Non-Performing Asset (NPA) by the respondents on the ground of petitioner's failure to repay the loan availed. As such, the 1st respondent which is a secured creditor is entitled to enforce the security interest without the intervention of the Court or Tribunal in accordance with the provisions of the Securitisation Act, 2002 as provided under Section 13. The petitioner does not dispute the fact that the 1st respondent issued the notice under Section 13(2) of the Securitisation Act on 13-9-2005 calling upon the petitioner to pay the amounts due. Since admittedly the petitioner did not make payment in compliance with the notice dated 13-9-2005, the respondents took possession of the mortgaged properties. The said fact has also not been disputed by the petitioner, though it is pleaded that only symbolic possession of the property has been taken. Once, the possession is taken under Sub-section (4) of Section 13 of the Act, the secured creditor is entitled to take recourse to any of the measures specified under Sub-section (4) of Section 13 of the Securitisation Act which includes sale of the secured assets for realising the secured assets.
8. However, since admittedly O.A. No. 204 of 2005 is pending as on today in the Debts Recovery Tribunal, Hyderabad, the question that arises for consideration is whether it is open to the respondents to issue the impugned sale notice invoking the provisions of the Securitisation Act, 2002.
9. The RDB Act, 1993 (Act No. 51 of 1993) has been enacted to provide for the establishment of Tribunals for expeditious adjudication and recovery of debts due to Banks and Financial Institutions and for matters connected therewith or incidental thereto. The word 'debt' has been defined under Section 2(g) of the said Act as any liability which is claimed as due from any person by a Bank or Financial Institution whether secured or unsecured or whether payable under a decree or order of any Civil Court or Arbitration Award. Chapter-II of the said Act deals with establishment of Tribunal and Appellate Tribunal and Chapter-Ill provides for the jurisdiction, powers and authority of Tribunals. Chapter-IV of the Act deals with the procedure for making Applications before the Tribunals. Section 19 of the RDB Act, 1993 is very exhaustive and provides for the presentation of the Application jurisdiction, fee to be paid, summons to be issued, power to make interim orders among various other procedural aspects.
10. It would be appropriate to extract Sub-section (1) of Section 19 of the RDB Act, 1993, which runs as under:
19. Application to the Tribunal :-(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction-
(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
(c) the cause of action, wholly or in part, arises.
(2)...
11. Under the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (for short, 'the Amendment Act, 2004), Section 19 of the RDB Act, 1993 was amended with effect from 11.11.2004 by inserting the following provisos after Sub-section (1) of Section 19:
Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken under that Act.
(emphasis supplied):
Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under Sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application:
Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.
12. In the light of the above provisos to Section 19(1) of the RDB Act, 1993, Sri P. Gangaiah Naidu, the learned Senior Counsel appearing for the petitioner contended that unless O.A. No. 204 of 2005 pending on the file of the Debts Recovery Tribunal is withdrawn, the 1st respondent bank cannot take any action under the Securitisation Act. In support of his submission, the learned Senior Counsel relied upon the decision of a Division Bench of the High Court of Punjab and Haryana in Kalyani Sales Company v. Union of India AIR 2006 P&H; 107, wherein it was held that the Bank or Financial Institution is required to elect its remedy to either proceed under the RDB Act, 1993 or to withdraw such proceedings to enable them to initiate action under the Securitisation Act, 2002. It was observed that though the scope and operation of these two statutes is different, but both lead to a common goal of recovery of debts due to Banks or Financial Institutions and therefore out of two parallel remedies the Bank has to elect its remedy.
13. However, Dr. P. Bhaskar Mohan, the learned Counsel appearing for the respondents while citing a decision of the Kerala High Court in Sahir Shan and Ors. v. Bank of India and Ors. : AIR2006Ker42 , contended that it is not mandatory for the Bank to withdraw O.A. pending in the Tribunal before invoking the provisions of the Securitisation Act, 2002.
14. On a careful consideration of the scheme of the two enactments viz., the RDB Act, 1993 and the Securitisation Act, 2002 though it is clear that both the Statutes are enacted with a common object of recovery of debts due to Banks and Financial Institutions, the Statement of Objects and Reasons of the Securitisation Act, 2002, which is a later enactment, shows that it is specifically aimed at empowering the Banks and Financial Institutions to take possession of the securities given for financial assistance and sell the same for recovery of the dues declared as NPAs without the intervention of the Court. It is a special enactment to regulate Securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. Section 35 of the Securitisation Act, 2002 gives overriding effect to the provisions of the said Act notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Section 37 of the Securitisation Act further made it clear that the provisions of the Securitisation Act shall be in addition to and not in derogation of certain statutes mentioned therein including the RDB Act, 1993 or any other law for the time being in force.
15. Sections 35 and 37 of the Securitisation Act may be extracted hereunder:
35. The provisions of this Act to override other laws :-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.
37. Application of other laws not barred:- The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.
16. From the above provisions, it is apparent that the Legislature while enacting the Securitisation Act, 2002, intended to provide a more efficacious remedy to the Banks and Financial Institutions for recovery of debts due in addition to the remedies already available under other laws in force. The non-obstante clause appended to Section 35 makes it clear that the provisions of the Securitisation Act, 2002 must prevail over the provisions of the existing laws in case of any inconsistency.
17. While so, under the Enforcement of Security Interest and Recovery of Debt Laws (Amendment) Act, 2004, both the Securitisation Act, 2002 and the RDB Act, 1993 were suitably amended in the light of the observations made by the Supreme Court in Mardia Chemicals Ltd. v. Union of India : AIR2004SC2371 , to enable the secured creditor to speedily recover their debts, if required by enforcement of security or other measures specified in Sub-section (4) of Section 13 of the Securitisation Act.
18. As noted above, three provisos were added to Section 19(1) of the RDB Act, 1993 under the Amendment Act, 2004.
19. It is true that the 1st proviso inserted to Section 19(1) of the RDB Act, 1993 provides that the Bank or Financial Institution has to make a petition seeking permission of the Tribunal to withdraw the Application for the purpose of taking action under the Securitisation Act, 2002. However, the fact that no corresponding amendment was brought to the provisions of the Securitisation Act, 2002, particularly Sections 35 and 37 of the said Act makes clear the intention of the Legislature that the overriding effect given to the provisions of the Securitisation Act shall continue and that the right conferred on the secured creditor i.e., the Bank and Financial Institution under the said Act to proceed against the securities without the intervention of the Court or Tribunal shall not be affected in any manner whatsoever.
20. It is also relevant to note that Section 19(1) of the RDB Act, 1993 is only a procedural provision which prescribes the procedure to make an Application to the Tribunal established under the Act for recovery of the debts, exceeding Rs. 10 lakhs, due to the Banks and Financial Institutions.
21. As summed up by the Full Bench of this Court in B. Sudhakar v. Union of India : AIR1995AP86 , it is a well-settled rule of construction that the meaning and scope of the proviso are dependent on the principal enacting provision to which it is tacked as a proviso and it cannot be taken as a separate or independent enactment to be read as divorced from the context unless the context itself compels such a treatment of the proviso. If the said principle is applied, there shall not be any dispute that the 1st proviso appended to Section 19(1) of the RDB Act, 1993, which is a procedural provision, in the absence of any other express provision either under the RDB Act, 1993 or the Securitisation Act, 2002 cannot be interpreted as an independent provision curtailing the substantive right conferred on the Banks and Financial Institutions under the Securitisation Act, 2002 to proceed against the securities without the intervention of the Court or Tribunal.
22. On a careful consideration of the object and purport of both the Securitisation Act, 2002 and the RDB Act, 1993, it appears to me that the provisos inserted to Section 19(1) of the RDB Act, 1993 by way of amendment had only conferred a discretion on the Tribunal to regulate its own proceedings i.e., either to proceed with the recovery proceedings pending on its file or to close the same by granting permission to the Bank or Financial Institution for withdrawal in the light of the facts and circumstances of the particular case. Any other interpretation would amount to empowering the Tribunal, which is an adjudicatory body under the RDB Act, 1993, to regulate the substantive rights conferred on the secured creditor under Section 13 of the Securitisation Act, 2002. Such interpretation which runs contrary to the basic scheme and object sought to be achieved by the Securitisation Act, 2002 is impermissible.
23. The above opinion of mine is fortified by the decision of the Division Bench of Kerala High Court in Sahir Shan's case (supra). The relevant excerpts from the said decision may be extracted hereunder:
Section 19 appears in Chapter IV of the RDB Act which deals with the procedure of Tribunals. Section 19(1) lays down the procedure with regard to the manner in which application is to be submitted before the Tribunal for recovery of any debt from any person. It also indicates the local limits or jurisdiction of the Tribunals. Various other clauses of Section 19 lay down the procedure as to how the Tribunal has to act once the application is received by it. It also lays down the procedure enabling the defendants to claim set off and also other incidental reliefs.
In other words, Section 19 is not a substantive provision but only a procedural provision. Proviso was added by amendment Act 2004 only to appraise the Tribunal of the intention of the Bank or Financial Institution to invoke the provisions of the Securitisation Act. It is not mandatory on the part of the Bank or Financial Institution to make an application before the Tribunal or to seek permission before invoking the provisions of the Securitisation Act. The power conferred on the Tribunal under the third proviso to Section 19(1)(c) is only to refuse or grant permission for withdrawal. No power is conferred on the Tribunal under the RDB Act to prevent the Bank or Financial Institution from invoking the provisions of the Securitisation Act. Only power conferred on the Tribunal is to decide as to whether the request for withdrawal of the application pending before the Tribunal could be granted or not.
24. However, the learned Senior Counsel appearing for the petitioner vehemently contended that the 1st respondent Bank has to choose only one remedy either under the RDB Act, 1993 or the Securitisation Act, 2002 in view of the doctrine of election as held by the Division Bench of the High Court of Punjab and Haryana in Kalyani Sales Company's case (supra).
25. In view of the overriding effect given to the Securitisation Act, 2002 under Sections 35 and 37 and having regard to the nature of the remedy provided under the said Act which enables the Banks and Financial Institutions to proceed against securities without the intervention of the Court in the event of default by the borrower, it is clear that the remedy available under the Securitisation Act, 2002 is much more efficacious remedy for faster recovery of Non-Performing Assets (NPAs). It is a special remedy which can be enforced against a particular class of borrowers. As noted above, it is in addition to the remedies already available under other laws in force, including RDB Act, 1993 and even in case of any inconsistency it is given an overriding effect. Hence, the mere fact that the remedies under both the enactments are aimed at a common purpose of recovery of debts due to the Banks and Financial Institutions will not render the same equal remedies compelling the Banks and Financial Institutions to choose only one of them. Therefore, the doctrine of election is not attracted.
26. Even otherwise, in the facts and circumstances of the present case, the pendency of O.A. No. 204 of 2005 before the Debts Recovery Tribunal, Hyderabad cannot be held to be a bar to issue the impugned sale notice invoking the provisions of the Securitisation Act, 2002 for the following reasons.
27. On a perusal of the 1st proviso to Section 19(1) of the RDB Act, 1993, extracted above, it is obvious that the concluding words that Act refer to the Securitisation Act, 2002. There can also be no dispute about the fact that the words for the purpose of taking action under the Securitisation Act refer to issuance of notice under Section 13(2) of the Securitisation Act, 2002 which is an initial step for recovery of debts invoking the provisions under the Securitisation Act, 2002. Hence, if the 1st proviso is analysed with particular reference to the concluding words if no such action had been taken earlier under that Act, it is clear that the permission from the Tribunal for withdrawal of an Application pending before it is necessary only where no action under the Securitisation Act, 2002 had been taken earlier. In other words, the requirement of withdrawal of the Application pending before the Tribunal is attracted only where the notice under Section 13(2) of the Securitisation Act, 2002 was not issued by the Bank or Financial Institution by the date of institution of the recovery proceedings in the Tribunal. It is also clear that whether the Application was filed in the Tribunal before or after the enforcement of the Amendment Act, 2004 is immaterial, but what is relevant is whether the Application is pending before the Tribunal by the date of taking action under the Securitisation Act, 2002 i.e., by the date of issuance of notice under Section 13(2).
28. In the case on hand, the notice under Section 13(2) of the Securitisation Act, 2002 was issued on 13-9-2005 and much thereafter O.A. No. 204 of 2005 was filed in the Debts Recovery Tribunal as the loan was getting time-barred. It is specifically pleaded so by the respondents in the counter-affidavit which has not been contradicted by the petitioner. In the circumstances, as per the above interpretation given to the 1st proviso appended to Section 19(1) of the RDB Act, 1993, it is not necessary for the respondents to seek withdrawal of O.A. No. 204 of 2005 before issuing the impugned sale notice. Since admittedly the action under the Securitisation Act, 2002 by issuing the notice under Section 13(2) was taken by the 1st respondent Bank prior to filing of O.A. No. 204 of 2005, the 1st proviso to Section 19(1) of the RDB Act, 1993 is not attracted to the case on hand. On that ground also, the contention of the petitioner that the impugned sale notice is illegal is liable to be rejected.
29. So far as the next objection raised by the petitioner that the mortgaged properties being agricultural lands are exempted from the provisions of the Securitisation Act and therefore they cannot be brought to sale under the impugned notice is concerned, it would be appropriate to extract Section 31 of the Securitisation Act, 2002 to the extent it is necessary:
31. Provisions of this Act not to apply in certain cases :-The provisions of this Act shall not apply to:
(a) ...
(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);
(h) ...
(i) any security interest created in agricultural land;
(j) ...
30. Whereas the petitioner pleaded that all the properties sought to be sold under the impugned notice are either residential houses or agricultural properties which are exempted from the operation of the Securitisation Act, 2002, the respondent Bank denied the same contending that the lands offered as security are not agricultural lands. In the counter-affidavit, it has been explained that the said lands are poultry units and the petitioner has been doing poultry business on the said lands and no agricultural activity is undertaken.
31. Though the petitioner in his affidavit-in-reply disputed the version of the respondent and contended that the poultry farms which are constructed in the agricultural lands are declared as agro-industries and the same cannot be held to be non-agricultural lands, such a disputed question of fact cannot be enquired into and decided by this Court in writ proceedings under Article 226 of the Constitution of India.
32. That apart, admittedly the notice under Section 13(2) of the Securitisation Act, 2002 was issued by the respondent Bank on 13-9-2005 calling upon the petitioner to pay the amount due within 60 days. The petitioner did not make any representation nor raised any objection as contemplated under Section 13(3-A) of the Securitisation Act. Under Sub-section (3-A) of Section 13 of the Securitisation Act which was inserted by Amendment Act 2004 with effect from 11.11.2004, the secured creditor is bound to consider the objections raised by the borrower and in case the objections are not acceptable, the same shall be communicated within one week of receipt of the objections assigning the reasons for non-acceptance of the objections. As held by the Division Bench of this Court in W.A. No. 2577 of 2005, dated 29-12-2005 Sub-section (3-A) of Section 13 of the Securitisation Act entitles the borrower not only to question the amount specified in the notice under Section 13(2) but also to. question the very initiation of proceedings, under the Securitisation Act and the; jurisdiction of the secured creditor to invoke the provisions of the Securitisation Act. No explanation is forthcoming from the petitioner as to why such objection was not raised in response to the notice under Section 13(2) of the Securitisation Act. If only the petitioner had availed the said opportunity, the respondent would have considered the same and the acceptance or otherwise of the objection would have been communicated to the petitioner assigning reasons.
33. Be that as it may, now that the notice under Sub-section (4) of Section 13 of the Securitisation Act has already been published and consequently the impugned sale notice was issued for sale of the secured assets which is one of the measures envisaged under Sub-section (4) of Section 13 of the Securitisation Act, an effective alternative remedy as provided under Section 17(1) of the Securitisation Act is available to the petitioner.
34. In the light of the efficacious alternative remedy available under the Securitisation Act, 2002 and keeping in view that the issue involves several disputed questions of fact, while declining to express any opinion with regard to the exemption claimed by the petitioner under Section 31 of the Securitisation Act, 2002, the petitioner is granted liberty to work out the said alternative remedy if so advised.
35. Subject to the above, the writ petition is dismissed. No costs.