P. Dhamodharan Vs. Palani Andavar Mills Ltd. - Court Judgment

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- securitisation & reconstruction of financial assets & enforcement of security interest act, 2002 [c.a. no. 54/2002]section 17; power of tribunal to impose condition relating to deposit for grant of stay of auction held, there is no specific provision made under section 17 of securitisation act or under any other provisions of the said act empowering the tribunal to pass any interim order. but under sub-section (12) of section 19 of the recovery of debts due to banks and financial institutions act, 1993, the tribunal has been empowered to pass various interim orders. if sub-section (7) of section 17 of securitisation act is read along with sub-section (12) of section 19 of recovery of debts due to bank is and financial institutions act, it would be clear that the tribunal also has jurisdiction to pass interim orders under section 17 of the securitisation act in appropriate cases. the tribunal is empowered to grant interim stay subject to such conditions as may be deemed proper including condition of deposit. even under section 69 of the transfer of property act, the only remedy of the borrower whose mortgage has invoked section 69 of the transfer of property act, is to file a civil suit and in such suit the court has power to grant injunction and to impose condition for the grant thereof--section 17; [a.p. shah c.j., f.m. ibrahim kalifulla & v. ramasubramanian, jj] proceedings under section 17 power of the tribunal to pass any interim order held, once the possession of the secured asset is taken, there would be no occasion for the tribunal to order redelivery of possession till final determination of the issue. in other words, it is only when the tribunal comes to the conclusion that any of the measures, referred to in section 13 (4) taken by the secured creditor are not in accordance with the provisions of the act and the rules made thereunder, then only the tribunal can restore possession of such secured assets to the borrower. by virtue of sub-section (7) of section 17 of the securitisation act read with section 19 (12) of the recovery of debts due to banks and financial institutions act the tribunal undoubtedly possess ancillary power to pass interim orders subject to the conditions as it may deems fit and proper to impose, but it does not in any way override the special provisions contained in section 17(3) of the securitisation act. the statutory scheme of the securitisation act is such that the borrower could take recourse to application under section 17 only if one or other measure is taken by the secured creditor, and the tribunal can restore the status quo ante only if it comes to the conclusion that any of the measure taken by the secured creditor is not in accordance with the provisions of the act. the scheme cannot be bypassed by issuing a mandatory order for redelivery of the possession before conclusion of the proceedings under section 17--sections 17, 13 (4); [a.p.shah, c.j., f.m. ibrahim kalifulia &v. ramasubramanian, jj] scope of enquiry under section 17 held, the main purpose of the securitisation act, and in particular section 13 thereof, is to enable and empower the secured creditors to take possession of their securities and to deal with them without the intervention of the court. therefore, in an application under section 17, the tribunal is concerned only with the validity of the acts of the secured creditor in taking possession of the securities and dealing with the same under section 13. all such grounds, which would render the action of the bank/financial institution illegal, can be raised before the tribunal in the proceedings under section 17. it is for the tribunal to decide in each case whether the action of the bank was in accordance with the provisions of the act and legally sustainable. however, while considering the question of validity of the action of the bank, it is not necessary for the tribunal to adjudicate the exact amount due to the secured creditors. in other words, the purpose of an application under section 17 is not the determination of the quantum of claim per se as the tribunal is concerned with the issue of the validity of the measures taken by the banks/financial institutions under section 13(4)--sections 17(4), 13(4) ; [a.p. shan c.j.,f.m.ibrahim kalifulla & v. ramasubramanian, jj] appeal right of bank held, the right of the bank is not automatically suspended upon filing of an appeal by borrower under section 17 of the securitisation act and the bank as secured creditor can proceed to auction secured asset where no stay is granted by the tribunal. there is nothing in section 17 of the securitisation act which would indicate that the legislature intended that there would be automatic stay of recovery proceedings by bank under section 13(4) on filing an appeal by borrower under section 17. use of the expressions if and then under section 17 would not mean that the bank can take one or more measures laid down under section 13(4) only if the tribunal declares that the action taken already is in accordance with the provisions of the securitisation act and the rules made thereunder. use of the word if does not connote a condition precedent. it is a recognised rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they harmonized with the object of the statute and which effectuate the object of the legislature. the provisions of section 17 must, therefore, receive such construction at the hands of the court as would advance the object and at any event not thwart it. in other words, the principle of purposive interpretation should be applied while construing the said provisions. the securitisation act is enacted to provide a speedy and summary remedy for recovery of thousands of crores which were due to the banks and financial institutions. a. ramamurthi, j.1. the above two revision petitions are filed by the petitioner/third accused in s.t.c. nos. 1396 and 894 of 1998 respectively on the file of the judicial magistrate court, udumalpet, and he filed these revisions aggrieved against the orders passed in cm.p. nos. 6230 and 5918 of 1998 respectively, dated october 14, 1998.2. the case in brief for disposal of both the revision petitions is as follows :the respondent filed two complaints under sections 138 and 142 of the negotiable instruments act, 1881 (hereinafter referred to as 'the n.i. act'), against three accused and the petitioner is the third accused. the first accused is the firm and the company issued a cheque dated january 30, 1998, of m/s. city union bank limited, tiruppur, for rs. 1,57,984 in favour of the complainant in one case. similarly in the other case also on march 15, 1998, a cheque for rs. 2 lakhs was issued by the second accused in the capacity of the partner in the accused firm. when both the cheques were presented for encashment, they were dishonoured and returned on the ground of 'insufficient funds'. statutory notice was also sent to all the accused concerned and after complying with all the formalities the respondent has filed the complaints. the petitioner/third accused filed separate application for discharge and it was opposed by the respondent/complainant and after hearing the parties, the learned magistrate dismissed both the applications and aggrieved against this, the present revision petitions have been filed.3. since the parties in both the cases are one and the same and the point in issue raised by the petitioner/third accused is also one and the same, a common order is pronounced. the parties will be hereinafter referred to as they are described in the complaint to avoid confusion.4. heard learned counsels of both the sides.5. the point that arises for consideration is whether the orders passed by the court below are proper and correct?6. point.--it is not in dispute that the complainant fi'ed the aforesaid two complaints for offences under sections 138 and 142 of the negotiable instruments act. the first accused is the firm and accused nos. 2 and 3 are said to be partners in the first accused firm. the impugned cheques in question were issued on behalf of the first accused-company signed by the second accused. learned counsel for the revision petitioner/third accused mainly contended that there is no allegation against the third accused to proceed further in the case. there is also no averment in the complaint or in the sworn statement that the petitioner is one of the partners of the firm incharge of or responsible for the day-to-day affairs of the company. admittedly, the cheques were not signed by the third accused. mere designation of the partner by itself does not subject him liable for the offence committed by the firm there was no material as on date to prosecute the third accused for the offence under section 138. there is no prima facie case to prosecute the petitioner, who is a sleeping partner of the firm. mere averment in the complaints that the cheques were issued with the knowledge of the third accused is not enough to prosecute him.7. it is seen from the complaints that the third accused has been designated as a partner in the first accused-company. admittedly, the cheques in question were issued only by the first and second accused and the third accused has no role in the same. it is seen from para 6 of the complaints that the second accused had issued the cheque on behalf of the first accused firm with the knowledge of the third accused knowing fully well that there was no sufficient funds. apart from this general allegation, nothing has been stated in the complaints about the part played by the third accused. it is not stated in the complaints that the third accused is in charge of the day-to-day administration of the company. unfortunately the court below has dismissed the applications filed by the third accused on the ground that this matter can be decided only in the course of trial. simply because there is a sole document to show that the third accused had received the goods for and on behalf of the first accused-company on one occasion, it will not establish that the third accused had active role in the day-to-day work of the first accused-company.8. learned counsel for the third accused relied on the decision reported in col. r.s. aggarwal, m.d., haryana petrochemicals ltd. v. ashok leyland finance ltd. (1998) 1 lw (crl.) 24, wherein it was held that to bring the persons within the purview of section 138 of the negotiable instruments act there must be an allegation prima facie disclosing the commission of offence as regards persons shown as accused.9. reliance is also placed upon another decision in coronation printing ink ., :, that partners who are not responsible for day-to-day affairs of accused firm or company need not be arrayed as accused. these two decisions are applicable to the case on hand. there should be some prima facie material to proceed further against the petitioner. as adverted to, he is not the signatory to the cheques in question. there is no allegation in the complaints or in the sworn statement that the third accused was incharge of the day-to-day affairs of the company and in the absence of any such averment, i am of the view that there is no prima facie material to proceed further against the third accused. the reasoning given by the court below that the part played by the third accused can be considered during the course of trial cannot be considered. if there is a proper allegation in the complaints, then only the parties can be directed to lead evidence and establish the same. but in the present petitions concerned, when the third accused had come forward with a specific stand, it is the duly of the respondent/complainant to rebut the same. in view of the discussion and also the decisions referred to above, i am of the view that the court below has not appreciated the contentions raised by the petitioner/third accused and had mechanically dismissed the applications without knowing the consequence. hence, the point is answered accordingly.10. for the reasons stated above, both the revision petitions are allowed and the orders passed by the court below dated october 14, 1998 are set aside and consequently c.m.p. nos. 6230 and 5918 of 1998 are allowed. crl. m.p. no. 490 of 1999 is closed.