Court No. 21
Civil Misc. Writ Petition No. 71659 of 2009
M/s Diksha Offset Printing & Publication
Vs.
Chief Judicial Magistrate, Gorakhpur and others.
Hon'ble V.K.Shukla,J.
Present writ petition has been filed for quashing of the order dated
03.10.2009 passed by Chief Judicial Magistrate, Gorakhpur accepting the
request of Bank under Section 14(1) & 14 (2) of Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act
2002.
Brief background of the case is that petitioner’s firm namely, M/s
Diksha Offset Printing & Publication has taken loan. Said loan in question
was not deposited as per term and condition and petitioners in their turn
proceeded to file suit No. 839 of 2008 for not adopting coercive method and
for accountancy. Injunction application was also moved. Said proceedings
are on going. The Bank in question published auction notice in exercise of
its authority under Section 13(4) of Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act 2002 for putting
up for sale of property for realization of debts due to the Bank. It has been
mentioned in paragraph-11 of the writ petition that some auction
proceedings has taken place. It has been contended that thereafter
application has been moved under Section 14(1) & (2) and same has been
allowed. At this juncture present writ petition in question has been filed.
Learned counsel for the petitioner Sri H.P. Mishra, contended with
vehemence that civil suit filed on behalf of petitioner has been pending and
in such a situation, said steps ought not to have been undertaken as has
been sought to be undertaken in the present case, as such order passed by
Chief Judicial Magistrate is liable to be set aside.
Countering the said submission Sri Rakesh Mishra, Advocate
contended that SRFAESI Act 2002 is special Act and action which has been
taken is strictly in accordance with law, as such writ petition in question is
liable to be dismissed.
After respective arguments have been advanced, undisputed position
is that Bank acting through its authorized officer in exercise of its authority
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under Section 13(4) of SRFAESI 2002 has put up the property in question
for sale and this much has also been accepted at the Bar that auction
proceedings has been undertaken and in order to get possession of the said
property in question in favour of auction purchaser application has been
moved under Section 14(1) & (2) of the Act for rendering assistance in
procuring possession and said application has been allowed.
Hon’ble Apex Court in the case of M/s Transcore Vs. Union of
India & Anr reported in AIR 2007 712, framed three points for
determination; second point thereof, which was taken for determination is
as follows:
“(II) Whether recourse to take possession of the secured assets
of the borrower in terms of “Section 13 (4) of the NPA Act comprehends
the power to take actual possession of the immovable property.”
Said issue has been dealt with in paragraph 52 of the aforesaid
judgment, and therein view has been taken by Hon’ble Apex Court that till
the time of issuance of sale certificate, the authorised officer is like a court
receiver under Order XL Rule 1 CPC. The court receiver can take symbolic
possession and in appropriate cases where the court receiver finds that a
third party interest is likely to be created overnight, he can take actual
possession even prior to the decree. The authorized officer under Rule 8 has
5 greater powers than even a court receiver as security interest in the
property is already created in favour of the banks/FIs. That interest needs
to be protected. Relevant extract, paragraphs 52 to 56 of the said judgment
is being quoted below:
52. The short question under this head is whether recourse to
take possession of the secured assets of the borrower under Section
13(4) of the NPA Act comprehends the power to take actual possession
of the immovable property.
53. Mr. N. C. Sahni and Mr. Pankaj Gupta, learned advocates appearing
on behalf of the respective borrowers submitted that Section 13(4) of
the NPA Act empowers the secured creditor to take possession of the
secured immovable assets of the borrower on expiry of sixty days and
notice served under Section 13(2) of that Act. It is pointed out that in
many cases, the banks/FIs have taken actual physical possession
whereas in other cases they have taken only a symbolic possession.
Learned advocates submitted that in Kalyani Sales Co., the High Court
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has rightly held that if physical possession is taken on expiry of sixty
days, the remedy of application under Section 17 of the NPA Act by the
borrower would become illusory and meaningless as the borrower or the
person in possession would be dispossessed even before adjudication of
the objections by the tribunal. Learned advocates further submitted that
under Section 13(8), the bank/FI is prevented from selling the secured
assets, if the dues of the secured creditor with all costs, charges and
expenses are tendered to the secured creditor at any time before the
date fixed for sale. Learned advocates pointed out that under Rule 8(1)
of the 2002 Rules, a secured creditor is empowered to take possession
as per notice appended in terms of Appendix IV. That notice cautions
the borrower not to deal with the property. Learned advocates
submitted that notice in terms of Rule 8(1) of the 2002 Rules operates
as attachment. It contemplates a symbolic possession. Learned
advocates submitted that actual physical possession of immovable
assets can be taken under Rule 8(3), in cases where there is a vacant
plot or 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 under Rule
8(1); that actual physical possession is to be delivered only after
confirmation of sale under Rule 9(6) read with Appendix V under which
the authorised officer is empowered to deliver the property to the
purchaser free from all encumbrances in terms of Rule 9(9) of the 2002
Rules. Learned advocates, therefore, submitted that the High Court was
right 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 NPA Act so as to defeat the
adjudication of his claim by the DRT under Section 17 of NPA Act, and
that, physical possession can be taken only after the sale is confirmed in
terms of Rule 9(9) of the 2002 Rules.
54. We do not find any merits on the above contentions for the
following reasons.
“55. The word possession is a relative concept. It is not an
absolute concept. The dichotomy between symbolic and physical
possession does not find place in the Act. As stated above, there is a
conceptual distinction between securities by which the creditor obtains
ownership of or interest in the property concerned (mortgages) and
securities where the creditor obtains neither an interest in nor
possession of the property but the property is appropriated to the
satisfaction of the debt (charges). Basically, the NPA Act deals with the
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former type of securities under which the secured creditor, namely, the
bank/FI obtains interest in the property concerned. It is for this reason
that the NPA Act ousts the intervention of the courts/Tribunals.
56. Keeping the above conceptual aspect in mind, we find that Section
13(4) of the NPA Act proceeds on the basis that the borrower, who is
under a liability, has failed to discharge his liability within the period
prescribed under Section 13(2), which enables the secured creditor to
take recourse to one of the measures, namely, taking possession of the
secured assets including the right to transfer by way of lease,
assignment or sale for realizing the secured assets. Section 13(4-A)
refers to the word “possession” simpliciter. There is no dichotomy in
sub-section (4-A) as pleaded on behalf of the borrowers. Under Rule 8
of the 2002 Rules, the authorised officer is empowered to take
possession by delivering the possession notice prepared as nearly as
possible in Appendix IV to the 2002 Rules. That notice is required to be
affixed on the property. Rule 8 deals with sale of immovable secured
assets. Appendix IV prescribes the form of possession notice. It inter
alia states that notice is given to the borrower who has failed to repay
the amount informing him and the public that the bank/FI has taken
possession of the property under Section 13(4) read with Rule 9 of the
2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and
delivery of possession. Rule 9(6) states that on confirmation of sale, if
the terms of payment are complied with, the authorised officer shall
issue a sale certificate in favour of the purchaser in the form given in
Appendix V to the 2002 Rules. Rule 9(9) states that the authorised
officer shall deliver the property to the buyer free from all
encumbrances known to the secured creditor or not known to the
secured creditor. (Emphasis supplied). Section 14 of the NPA Act states
that 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, the secured creditor may, for the purpose of taking
possession, request in writing to the District Magistrate to take
possession thereof. Section 17(1) of NPA Act refers to right of appeal.
Section 17(3) states that if the DRT as an appellate authority after
examining the facts and circumstances of the case comes to the
conclusion that any of the measures under Section 13(4) taken by the
secured creditor are not in accordance with the provisions of the Act, it
may by order declare that the recourse taken to any one or more
measures is invalid, and consequently, restore possession to the
borrower and can also restore management of the business of the
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borrower. Therefore, the scheme of Section 13(4) read with Section
17(3) shows that if the borrower is dispossessed, not in accordance
with the provisions of the Act, then the DRT is entitled to put the clock
back by restoring the status quo ante. Therefore, it cannot be said that
if possession is taken before confirmation of sale, the rights of the
borrower to get the dispute adjudicated upon is defeated by the
authorised officer taking possession. As stated above, the NPA Act
provides for recovery of possession by non-adjudicatory process,
therefore, to say that the rights of the borrower would be defeated
without adjudication would be erroneous. Rule 8, undoubtedly, refers to
sale of immovable secured asset. However, Rule 8(4) indicates that
where possession is taken by the authorised officer before issuance of
sale certificate under Rule 9, the authorised officer shall take steps for
preservation and protection of secured assets till they are sold or
otherwise disposed of. Under Section 13(8), if the dues of the secured
creditor together with all costs, charges and expenses incurred by him
are tendered to the creditor before the date fixed for sale or transfer,
the asset shall not be sold or transferred. The costs, charges and
expenses referred to in Section 13(8) will include costs, charges and
expenses which the authorised officer incurs for preserving and
protecting the secured assets till they are sold or disposed of in terms
of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance
of sale certificate and delivery of possession under Rule 9. Till the time
of issuance of sale certificate, the authorised officer is like a court
receiver under Order XL, Rule 1, CPC. The court receiver can take
symbolic possession and in appropriate cases where the court receiver
finds that a third party interest is likely to be created overnight, he can
take actual possession even prior to the decree. The authorized officer
under Rule 8 has greater powers than even a court receiver as security
interest in the property is already created in favour of the banks/FIs.
That interest needs to be protected. Therefore, Rule 8 provides that till
issuance of the sale certificate under Rule 9, the authorized officer shall
take such steps as he deems fit to preserve the secured asset. It is well
settled that third party interests are created overnight and in very many
cases those third parties take up the defence of being a bona fide
purchaser for value without notice. It is these types of disputes which
are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules.
In the circumstances, the drawing of dichotomy between symbolic and
actual possession does not find place in the scheme of the NPA Act read
with the 2002 Rules.
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(iii) On Point No. 3, on question of Court fee : ”
On the parameter as set out, in the fact of the present case, action
taken is strictly in accordance with law, as such no interference is being
made.
Consequently, present writ petition as it has been framed and drawn
is dismissed.
Dated 04.01.2010
Dhruv