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Arun Kumar Arora and anr. Vs. Union of India (Uoi) and ors. - Court Judgment

SooperKanoon Citation

Subject

Commercial

Court

Punjab and Haryana High Court

Decided On

Case Number

Civil Writ Petition No. 3298 of 2006

Judge

Reported in

AIR2006P& H211; (2006)144PLR1; [2007]74SCL237(Punj& Har)

Acts

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), 2002 - Sections 13(2), 13(4), 14 and 17(1); Recovery of Debts Due to the Banks and Financial Institutions Act, 1993 - Sections 13(4), 17, 17(1) and 22; Debts Recovery Tribunal (Procedure) Rules, 1993 - Rules 7 and 18; Security Interest (Enforcement) Rules, 2002 - Rules 8(1), 8(3), 9(6) and 9(9)

Appellant

Arun Kumar Arora and anr.

Respondent

Union of India (Uoi) and ors.

Appellant Advocate

N.C. Sahni, Adv.

Respondent Advocate

Askish Rawal, Adv. and; Daya Chaudhary, S.C. for Respondent No. 1 and;

Disposition

Petition allowed

Cases Referred

Kalyani Sales Company and Anr. v. Union of India and Anr. In

Excerpt:


.....the order of refusal passed to the persons concerned, the period of limitation for filing an appeal would commence from the date when the parties concerned acquire knowledge of passing of the said order. - it was further the case of the bank that as the petitioners had failed to comply with the undertaking given before the learned presiding officer, debts recovery tribunal, chandigarh, whereby the parties had agreed to clear the dues of the bank, they were not entitled to invoke the extra-ordinary jurisdiction of this court. 2 and 3 has also contended that the judgment of this court in m/s kalyani sales company's case (supra) cannot be said to be laying down good law as it is contrary to the judgment of the hon'ble the supreme court in mardia chemicals ltd. the judgment in m/s kalyani sales company's case (supra) applies to the present case, as the right of the petitioners to have adjudication of the matter, is sought to be defeated by taking physical possession of the property.vinod kumar sharma, j.1. petitioners have challenged the order dated 22.2.2006 passed by the debts recovery appellate tribunal, delhi, vide which appeal filed by m/s punjab and sind bank and another against the order passed by the debts recovery tribunal, chandigarh, dated 20.1.2006 in interim appeal no. 927 of 2005 and consequential order passed on 23.1.2006 in s.a. no. 69 of 2005, was allowed.2. the facts leading to the filing of the present writ petition are that petitioner no. 1 is running business of commission agent in partnership with respondent no. 4 under the name and style of m/s partap trading company, shop no. 18, new sabzi mandi, jalandhar city. he is also a partner in another firm running under the name and style of prabhat trading company from the same premises i.e. shop no. 18, new sabzi mandi, jalandhar city. both the firms had availed over-draft limits from m/s punjab and sind bank (hereinafter referred to as 'bank') for running of their business and in order to secure the repayment, the shop was mortgaged with the bank.3. it was the case of the petitioners that there was a dispute between petitioner no. l and his brother respondent no. 4 who was also partner in.....

Judgment:


Vinod Kumar Sharma, J.

1. Petitioners have challenged the order dated 22.2.2006 passed by the Debts Recovery Appellate Tribunal, Delhi, vide which appeal filed by M/s Punjab and Sind Bank and another against the order passed by the Debts Recovery Tribunal, Chandigarh, dated 20.1.2006 in Interim Appeal No. 927 of 2005 and consequential order passed on 23.1.2006 in S.A. No. 69 of 2005, was allowed.

2. The facts leading to the filing of the present writ petition are that petitioner No. 1 is running business of commission agent in partnership with respondent No. 4 under the name and style of M/s Partap Trading Company, Shop No. 18, New Sabzi Mandi, Jalandhar City. He is also a partner in another firm running under the name and style of Prabhat Trading Company from the same premises i.e. Shop No. 18, New Sabzi Mandi, Jalandhar City. Both the firms had availed over-draft limits from M/s Punjab and Sind Bank (hereinafter referred to as 'Bank') for running of their business and in order to secure the repayment, the shop was mortgaged with the Bank.

3. It was the case of the petitioners that there was a dispute between petitioner No. l and his brother respondent No. 4 who was also partner in both the firms and in order to recover the dues respondent-Bank served a notice dated 22.5.2003 Under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter called 'Securitisation Act, 2002') wherein the claim was that a sum of Rs. 1,96,952/- was due. Along with this notice another notice was also served on the same date Under Section 13(2) of the Securitisation Act, 2002 for recovery of Rs. 8,16,213.09. The petitioner firm paid a sum of Rs. 1,11,210/- to the Bank on 17.1.2004, thus leaving behind a balance of Rs. 85,000/- against the first notice, whereas against the second notice, a sum of Rs. 459,790/- was paid.

4. The case of the petitioners is that after making the above said payments, the Bank was requested not to take any further action under the Securitisation Act, 2002 as the balance payment was not made due to dispute between the partners. It is further averred that on 12.3.2004 the Bank invoked the provisions Under Section 13(4) of the Securitisation Act, 2002 and in pursuance thereof a notice for possession was affixed on the shop. Physical possession of half portion of Shop No. 18 adjoining shop No. 17, New Sabzi Maridi, Jalandhar City, was taken and the same was closed by putting its lock and seal on the door. The goods lying in the shop were also taken possession of.

5. It is the further case of the petitioners that an inventory was prepared of goods taken in possession in absence of petitioner No. 1. The allegations of the petitioners are that this action of the Bank was illegal, unlawful and was committed with mala fide intention and in connivance and conspiracy with the brother of the petitioner No. l, who was also a partner in the said firms. According to the petitioners, the object was to destabilize petitioner No. 1 from his business and help respondent No. 4.

6. It is the case of the petitioners that as the request of petitioner No. 1 was not acceded to deliver back the possession, he filed an appeal/application Under Section 17(1) of the Securitisation Act, 2002 on 24.5.2004. The said application stands registered as S.A. No. 69 of 2005 which is pending adjudication before the Debts Recovery Tribunal, Chandigarh. The petitioner also moved an application for stay of further proceedings. The Presiding Officer of the Debts Recovery Tribunal, Chandigarh, ordered the stay on condition of the petitioner's depositing a sum of Rs. one lac which was deposited by the petitioner with the Tribunal on 26.6.2004, so as to restrain the Bank from selling the property in dispute. It is also averred that during the course of proceedings Under Section 17 of the Securitisation Act, 2002, a request was made to the Debts Recovery Tribunal, Chandigarh to direct the respondent-Bank to deliver back the possession of the portion of Shop No. 18, New Sabzi Mandi, Jalandhar City, which was taken by the respondent-Bank, on the plea that entire dues payable to the Bank, had not been paid by the petitioner.

7. The learned Debts Recovery Tribunal, Chandigarh vide order dated 5.9.2005 directed that the applicant should not be deprived of the possession specially when he has cleared all the dues in the account of M/s Partap Trading Company. A direction was also issued to open the seal of the secured asset (shop) with immediate effect. The said order was challenged by way of Miscellaneous Appeal No. 214 of 2005 by the Bank before the Debts Recovery Appellate Tribunal, New Delhi. The Appellate Tribunal by way of order dated 23.9.2005 disposed of the appeal by directing the Debts Recovery Tribunal, Chandigarh, to decide the main application and it was further directed that order dated 5.9.2005, impugned in the said appeal, shall not be given effect to till the application filed Under Section 17 of the Securitisation Act, 2002 is decided on merits. The petitioner thereafter moved an application in I.A. No. 927 of 2005 in S.A. No. 69 of 2005 Under Section 22 of the Recovery of Debts Due to the Banks and Financial Institutions Act, 1993 read with Rule 18 of the Debts Recovery Tribunal (Procedure) Rules, 1993 for restoration of the possession of the secured assets.

8. The said application was hotly contested by the Bank. However, vide order dated 20.1.2006, the Debts Recovery Tribunal, Chandigarh, Camp at Delhi ordered the Bank to open the seal of portion of the premises i.e Shop No. 18, New Sabzi Mandi, Jalandhar, the actual possession for which was taken by the Bank. This order was passed in view of the judgment of this Court in the case of Kalyani Sales Company and Anr. v. Union of India and Anr. 1 (2006-1) 142 P.L.R. 1, decided on 8.12.2005. This order was again challenged by the Bank before the Debts Recovery Appellate Tribunal, Delhi and the appeal filed by it was allowed on 22.2.2006. This order, along with other orders, is under challenge. Though number of issues were raised, however, the Debts Recovery Appellate Tribunal, Delhi only considered issue No. 5 which is reproduced below for ready reference:

On the basis of submissions made by both the learned Counsel, the point for consideration is whether the Tribunal is justified in issuing a direction to these appellants to redeliver the possession of the property basing on the judgment rendered by the Hon'ble Punjab and Haryana High Court in 'M/s Kalyani Sales Company and Anr. v. Union of India and Anr.' The Hon'ble High Court formulated the following questions for consideration:

1. Whether the constitutionality of the provisions of the Act can be challenged before this Court by invoking the doctrine of sub silentio?

2. Whether the Debts Recovery Tribunal under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, would have the jurisdiction to entertain an application contemplated Under Section 17 of the Act in respect of the debts less than Rs. 10 lacs but more than Rs. l lac?

3. Whether ad valorem court-fee prescribed Under Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993 is payable on an application Under Section 17(1) of the Act in the absence of any rule framed under the said Act?

4. Whether the bank or financial institution having elected to seek their remedy in terms of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 for recovery of debt of Rs. 10 lacs or more in Civil Court for an amount less than Rs. 10 lacs and over Rs. l lac, can still invoke the jurisdiction of the Act for realizing the secured assets without either withdrawing or abandoning the same?

5. Whether recourse to take possession of the secured assets of the borrower in terms of Section 13(4) of the Act is the power to take actual possession of the immovable property.?

9. The learned Debts Recovery Appellate Tribunal by considering the judgment passed by this Court in the case of M/s Kalyani Sales Company and another and judgment of Hon'ble the Supreme Court in Mardia Chemicals Ltd. and Ors. v. Union of India (2004-3) 138 P.L.R. 271 (S.C.), held as under:

In view of above discussion, I am inclined to agree with the submission made on behalf of the appellant that the physical possession of the property in question taken by the appellant Bank is only after following the due procedure provided Under Section 14 of the Securitisation Act which step is in tune with the ratio laid down by the Hon'ble Punjab & Haryana High Court in M/s Kalyani Sales Company and Anr. v. Union of India and Anr. In that view of matter, appeal, is allowed. Consequently, the impugned order is set aside.

10. The petitioners have challenged this order of the Debts Recovery Appellate Tribunal primarily on the plea that the same is outcome of misreading of the judgment of this Court in M/s Kalyani Sales Company's case (supra). The case was contested by respondent Nos. 2 and 3 and a detailed written statement was filed by them alleging that the petitioners had not approached this Court with clean hands and were guilty of suppression of material facts and documents and, therefore, they were not entitled to be heard on merits. It was also pleaded that the petitioners have not placed on record copy of the grounds of appeal. Therefore, the writ petition is liable to be dismissed. The respondents further pleaded that, as copy of the application filed Under Section 17 of the Securitisation Act, 2002, has not been placed on record and has placed only the copy o the reply filed by the respondents, therefore, they are guilty of suppression of material facts. It was further the case of the Bank that as the petitioners had failed to comply with the undertaking given before the learned Presiding Officer, Debts Recovery Tribunal, Chandigarh, whereby the parties had agreed to clear the dues of the Bank, they were not entitled to invoke the extra-ordinary jurisdiction of this Court.

11. It was finally the case of the respondents that no interim relief can be granted to the petitioners as it would amount to allowing of their main relief/petition itself, especially when they were the defaulters with the Bank. It was also pleaded that the case was complete and was at final stage and, therefore, it was not appropriate to grant interim relief, which was, in fact, the main relief claimed by the petitioners. The allegations against the Presiding Officer, Debts Recovery Tribunal were also made and it was the case of the petitioners that these allegations were part of the appeal filed before the Debts Recovery Appellate Tribunal. However, no notice thereof was taken by the Appellate Tribunal, while allowing the appeal.

12. Mr. N.C. Sahni, learned Counsel appearing for the petitioners vehemently argued that the order passed by the Debts Recovery Appellate Tribunal cannot be sustained as it is the result of misreading of the judgment of this Court in M/s Kalyani Sales Company's case (supra). He made reference to para 42 of the judgment, which is reproduced below for ready reference:

The right to move an application Under Section 17 of the Act accrues to any person aggrieved by any of the measures referred to in Sub-section (4) of Section 13 of the Act. Sub-section (4) of Section 13 of the Act empowers the secured creditor to take possession of the secured immovable assets of the borrower after the expiry of 60 days of notice served Under Section 13(2) of the Act. In many cases, the bank or the financial institutions have taken actual physical possession of the secured assets of the borrower in terms of Section 13(4) of the Act, whereas in some cases, only symbolic possession has been taken. We are of the opinion that if the physical possession is taken soon after the expiry of 60 days; the remedy of an application Under Section 17 of the Act becomes illusory and meaningless. The person is dispossessed even before adjudication of the objections by the first adjudicatory authority. On the other hand, Sub-section (8) of Section 13 of the Act provides that the secured assets shall not be sold if the dues of the secured creditor together with all costs, charges and expenses are tendered to the secured creditor at any time before the date of fixed for sale or transfer. The possession is taken as per notice appended as Appendix IV in terms of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. The notice, in fact, cautions the borrower in particular and the public in general not to deal with the property. Undoubtedly, the notice is in the nature of attachment and only contemplates a symbolic possession. The actual physical possession of immovable property Under Sub-rule (3) of Rule 8 can be taken by the secured creditor of property, such as a vacant plot of a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice appended as Appendix IV in terms of Rule 8(1) of the Security Interest (Enforcement) Rules, 2002. Actual physical possession is to be delivered in terms of the Rule 9(6) read with Appendix v.appended to such rules. The authorised officer is to deliver the property to the purchaser free from encumbrances in terms of Sub-rule (9) of Rule 9 of Security Interest (Enforcement) Rules, 2002.

13. Learned Counsel for the petitioners, on the basis of findings of this Court, as referred to above, strongly contended that actual physical possession of immovable property could be taken by the secured creditor. It was also contended that the property in physical possession of a person can only be taken in terms of Rule 9(6) read with Appendix v appended to Security Interest (Enforcement) Rules, 2002. The case of the petitioners was that the Bank could only take symbolical possession and actual possession could only be taken after the disposal of the application Under Section 7 of the Act or when the property is sold and possession is to be delivered to the purchaser free from encumbrances. The learned Counsel further argued that it was not open to the Bank to dispossess the petitioners physically at the time of issuing notice Under Section 13(4) of the Act, so as to defeat the adjudication of their representation or objection by the Debts Recovery Tribunal. Thus, the contention of the learned Counsel for the petitioners is that the physical possession of the mortgaged property could be taken only after the adjudication is done Under Section 17 of the Act and that Section 14 would come into play only when the matter has been adjudicated upon by the Debt Recovery Tribunal or when after the sale of the property, actual physical possession is required to be given to the purchaser.

14. Mr. I.P. Singh, learned Counsel, appearing for respondent Nos. 2 and 3 supported the order by making reference to para 43 of the judgment of this Court in Kalyani Sales Company's case (supra) which reads as under:

Therefore, we have no hesitation in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice Under Section 13(4) of the Act so as to defeat the adjudication of his representation or objection by the Debts Recovery Tribunal. The physical possession can be taken by the bank or the financial institution by following the procedure laid down in Section 14 of the Act or after sale is confirmed in terms of Rule 9 particularly Sub-rule (9) of Rule 9 of Security Interest (Enforcement) Rules, 2002.

15. The contention of the learned Counsel for the petitioners is that Section 14 of the Securitisation Act, 2002, authorises the Bank to get the possession by making a request in writing to the District Magistrate which has been done in the present case and, therefore, the Debts Recovery Appellate Tribunal was right in allowing the appeal as action of the respondents was protected even by this Court in view of para 43 of this Court's judgment in M/s Kalyani Sales Company's case (supra) reproduced above. Section 14(1) of the Securitisation Act, 2002 reads as under:

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 assets 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 such secured asset. request, in writing, to the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or the 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 document relating thereto; and

(b) forward such assets and documents to the secured creditor.

16. Learned Counsel appearing for respondent No. 2 and 3 has also contended that the judgment of this Court in M/s Kalyani Sales Company's case (supra) cannot be said to be laying down good law as it is contrary to the judgment of the Hon'ble the Supreme Court in Mardia Chemicals Ltd.'s case (supra). The contention of the learned Counsel is that the Hon'ble Supreme Court in the aforesaid case had authorised the taking of physical possession and, therefore, the judgment in M/s Kalyani Sales Company's case (supra) was contrary to the law laid down by the Hon'ble Supreme Court. On the basis of the said judgment, no relief can be granted to the petitioners. The petitioners made reference to paras 68 and 80 of the said judgment.

17. We have considered the contentions raised by the counsel for both the parties and agree with the stand taken by the petitioneRs.

18. This Court in the case of M/s Kalyani Sales Company andanother (supra) had taken note of the judgment of the Hon'ble Supremein Mardia Chemcials Ltd 's case (supra) and thereafter had come to the conclusion that the secured creditor is entitled to take the symbolic possession of the property Under Section 13(4) of the Securitisation Act, 2002, so that application, Under Section 17 xof the Act, does not become illusory or meaningless. The judgment in M/s Kalyani Sales Company's case (supra) applies to the present case, as the right of the petitioners to have adjudication of the matter, is sought to be defeated by taking physical possession of the property. The learned Debts Recovery Tribunal was right in ordering that the possession be delivered back to the petitioners during the pendency of the application Under Section 17 of the Act, as the petitioners were admittedly in physical possession of the property and running their business from the said property, Section 14 of the Securitisation Act, 2002 cannot be interpreted to defeat the rights granted to a party, who Under Section 17 of the Act is entitled to have their objections adjudicated. A reading of Section 14 of the Securitisation Act, 2002 itself makes it clear that it is only when the possession of asset is required to be taken by the secured creditor or the same is required to be sold or transferred by the secured creditor under the provisions of the Act, it is then that an application can be made. Section 14 of the Act has to be read with the provisions of Section 34 and 17 of the Act and cannot be interpreted to defeat the right of the parties Under Section 17 of the Act, as is sought to be done by the Bank and, therefore, we do not agree with the contention raised by the respondent-Bank or with the findings recorded by the Debts Recovery Appellate Tribunal that the possession has been taken in consonance with the law laid down by this Court.

19. It may also be noticed that the counsel for respondent Nos. 2 and 3 made allegations against the Presiding Officer, Debts Recovery Tribunal with regard to her conduct in passing the order which was challenged before the Debts Recovery Appellate Tribunal. However, we are not taking notice of the said allegations. Firstly, for the reasons, that those very allegations were levelled by the respondent-Bank before the Debts Recovery Appellate Tribunal and no notice thereof has been taken. Even before this Court, the Presiding Officer is not a party and, therefore, it would not be appropriate for this Court to take notice of the allegations made at the back of the Presiding Officer. We find that the order passed by the Debts Recovery Tribunal, Chandigarh Bench, was in consonance with the law laid down by this Court in M/s Kalyani Sales Company's case (supra) and the procedure adopted by the respondent-Bank cannot be said to be one in consonance with the provisions of the Securitisation Act, 2002. Therefore, for the reasons stated above, this writ petition is allowed and order passed by the Debts Recovery Tribunal, Chandigarh, is restored. The respondent-Bank is directed to hand over the physical possession of the shop in dispute to the petitioners forthwith. However, there will be no order as to costs.


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