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MS KALYANI SALE COMPANY versus UNION OF INDIA

High Court of Punjab and Haryana, Chandigarh

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MS KALYANI SALE COMPANY v. UNION OF INDIA - CWP-2555-2005 [2000] RD-P&H 1 (2 June 2000)

CWP No. 2550 of 2005 (1)

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

CIVIL WRIT PETITION NO. 2550 of 2005

DATE OF DECISION: December 08, 2005

M/s Kalyani Sales Company and another ....PETITIONERS VERSUS

Union of India and another ....RESPONDENTS Present: Sh.A.K.Jaiswal, Advocate for the petitioners in CWP No.2550 of 2005.

Sh.Amit Rawal, Advocate for the petitioner in CWP Nos.2406 and 1342 of 2005

Sh.Pankaj Gupta, Advocate for the petitioner in CWP Nos.19583 of 2004 and 2606 of 2005 Ms.Pooja Chopra, Advocate for the petitioner in CWP No.12666 of 2004

Sh.Harkesh Munuja, Advocate for the petitioner in CWP No.1388 of 2005

Ms.Jyoti Sareen, Advocate for the petitioner in CWP No.353 of 2005

Sh.Puneet Jindal, Advocate for the petitioner in CWP No.1342 of 2005

Sh.Gurpreet Singh, Central Govt.Counsel, for Union of India.

Sh.Parmod Goyal, Advocate for Central Bank of India.

Sh.G.S.Anand, Advocate for Oriental Bank of Commerce, and Punjab National Bank.

CWP No. 2550 of 2005 (2)

CORAM
HON'BLE MR.JUSTICE D.K.JAIN, CHIEF JUSTICE.

HON'BLE MR.JUSTICE HEMANT GUPTA.

1. Whether Reporters of local papers may be allowed to see the judgment ?

2. To be referred to the Reporters or not ?

3. Whether the judgment should be reported in the Digest ? -.-

D.K.Jain (C.J.)

Rule D.B.

2. Challenge in this bunch of writ petitions is to the legality and validity of the action taken by various banks and financial institutions under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short the Act).

3. We have heard learned counsel for the parties at considerable length on common legal issues, which we propose to deal with in this judgment. We shall, however, take up each of the writ petitions' separately for decision on merits. But, in order to appreciate the main controversy, giving rise to this judicial action, we shall briefly refer to the pleadings in CWP No. 2550 of 2005. These are as follows:

On 29.09.2003, the Bank issued to the petitioners a notice under Section 13 (2) of the Act calling upon them to pay an amount of Rs.88,61,830.68 p. The petitioners filed reply to the notice on 18.10.2003 CWP No. 2550 of 2005 (3)

disputing their liability to pay the said amount. They asked for a copy of account and withdrawal of the notice. Thereafter, a notice, dated 28.2.2004, under Section 13(4) of the Act was issued calling upon the petitioners to deliver the possession of the secured assets before 6.3.2004 failing which, the Authorised Officer of the Bank will take possession of the secured assets on 9.3.2004. The petitioners did not pay any amount. Consequently, a symbolic possession of the said assets was taken on 9.3.2004. On Bank's issuing a proclamation for sale of the secured assets, the petitioners filed an appeal / application questioning the said action on the part of the Bank.

Vide impugned letter, dated 11.2.2005, (Annexure P-32), an objection was raised by the Registrar, Debts Recovery Tribunal on appeal/ application, demanding Court fees of Rs. 91,000/-. Main challenge in the present writ petition is to this objection. It is pleaded that the demand of court fee is ultra vires, arbitrary, illegal, without jurisdiction and violative of Ordinance dated 11.11.2004. The petitioners, thus, pray for a writ of Mandamus directing the Debts Recovery Tribunal to entertain the appeal filed on payment of a fixed court fees of Rs.250/-.

4. In all these cases, the following common questions emerge, from the pleadings, for our 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 CWP No. 2550 of 2005 (4)

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.1 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 lac or more or in civil court for an amount less than Rs.10 lac and over Rs.1 lac, can still invoke the jurisdiction of the Act for realising 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 physical possession of immovable property ?

5. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter to be referred as " the RDB Act" ) was enacted for establishment of Tribunals for expeditious adjudication of recovery of debts due to banks and financial institutions and for other incidental matters. The provisions of the RDB Act are applicable if the amount of debt due to any bank CWP No. 2550 of 2005 (5)

or financial institution is Rs.10 lacs or more or such other amount being not less than Rs.1 lac, as the Central Government may by notification prescribe. Subsequently, the Act was enacted to empower the banks and financial institutions to take possession of securities and sell them. The validity of the RDB Act was upheld by the Supreme Court in Mardia Chemicals Limited vs. Union of India, (2004) 4 SCC 311, except to the extent that it struck down the requirement of deposit of 75% of the amount required to be deposited before entertaining an appeal under section 17 of the RDB Act.

Thereafter, the provisions of the RDB Act were amended by way of an ordinance. The said ordinance contemplated the secured creditor to consider the representation or objection raised by the borrowers in response to the notice issued by the secured creditors under section 13(2) of the RDB Act. It also provides for an application before the Debts Recovery Tribunal constituted under the RDB Act against any of the measures taken under Section 13(4) of the Act. The said ordinance was replaced by the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (Act No.30 of 2004) (hereinafter to be referred as "the Amending Act").

In Mardia Chemicals Limited's case (supra), while upholding the constitutionality of the provisions of the Act, their lordships of the Supeme Court observed that the remedy contemplated under section 17 of the Act is not appellate proceedings. It is the initial action which is brought before a forum raising grievance against the action or measures taken by one of the parties to the contract. It was found that the proceedings under section 17 of the CWP No. 2550 of 2005 (6)

Act are in lieu of civil suit which remedy is ordinarily available but for bar under section 34 of the Act. Nevertheless, the condition of pre-deposit of 75% of the amount due as a pre-requisite for entertainment of application under section 17 of the Act was found to be not only onerous and oppressive but also unreasonable and arbitrary. Thus, Sub-Section (2) of Section 17 was held to be violative of Article 14 of the Constitution. In para No. 79 of the judgment, the the Court observed that "some submissions have been made pointing out that in certain conditions it would not be clear as to in what manner the provisions of the Act would be workable." Yet, the Court found that the objections pointed out were not such which would render the statute invalid or unconstitutional.

As regards other problems about working of any particular provision of the Act in any particular factual situation, their lordships observed that these may be considered as and when they may arise.

Question No.1

6. Ms. Jyoti Sareen, learned counsel for the petitioner in CWP No. 353 of 2005 ( Sukhwinder Kaur vs. Union of India and others ), has vehemently argued that the judgment of the Supreme Court in Mardia Chemical Limited's case (supra) arises out of cases where the Debts Recovery Tribunal was, admittedly, having jurisdiction, the debt due being Rs.10 lacs or more. It is argued that though the RDB Act postulates transfer of proceedings pending before the civil Court to the Debts Recovery Tribunal in terms of section 31 of the RDB Act but the provisions of the Act do not contemplate transfer of any proceeding pending before the civil Court to the Tribunal. It is urged that CWP No. 2550 of 2005 (7)

Section 31(h) of the Act provides that the provisions of the Act shall not apply if any security interest for securing repayment of any financial asset is not exceeding one lac rupees. In other words, for securing repayment of less than one lac rupees, the provisions of the Act are not applicable. The submission is that since such a question was neither raised or decided by the Supreme Court, the question whether the provisions of the Act on that aspect are legal and valid is still open to challenge. It was contended that the issues examined by the Supreme Court were in the context of another statute, namely, the RDB Act, which was already in operation and, therefore, the provisions of the Act were not considered with reference to the suits pending before the civil court.

Referring to the decisions of the Apex Court in State of U.P. and another vs. Synthetics and Chemicals Ltd., and another, (1991) 4 SCC 139, and S.Shanmugavel Nadar vs. State of Tamil Nadu and another, (2002) 8 SCC 361, learned counsel for the petitioner has pressed into service the doctrine of sub silentio.

7. We are unable to agree with the argument that it is still open to the petitioners to challenge the validity of provisions of the Act on the basis of doctrine of sub silentio. In fact, various questions framed by the Supreme Court, particularly questions No.4 and 5, make it abundantly clear that the Court was seized of the provisions of the Act irrespective of the quantum of debt. As noted above, in paragraph 79 of the report, it has been observed that though some submissions had been made pointing out certain circumstances, but these objections were not such which would render the statute invalid or CWP No. 2550 of 2005 (8)

unconstitutional. True, that the issue in regard to the resolution of problems in the working of any particular provision of the Act in any particular factual situation was kept open to be considered as and when raised, yet we are of the view that in so far as the constitutional validity of any of the provisions of the Act as a whole is concerned, the issue stands concluded.

8. A Full Bench of this court in the case of Pritam Kaur vs. Surjit Singh, 1984 Punjab Law Reporter, 202, relying upon the Supreme Court decisions reported as Smt.Somawati and others vs. The State of Punjab and others, AIR 1963 SC 151 and T.Govindaraja Mudaliar etc., vs. The State of Tamil Nadu, AIR 1973 SC 974, has held that if the ratios of the judgments of the superior Courts were to be merely rested upon the ingenuity of the counsel to raise fresh or novel argument (which had not been earlier raised or considered) in order to dislodge them, then the hallowed rule of finality of binding precedent would become merely a teasing mirage. The binding effect of a decision does not depend upon whether a particular argument was considered therein or not, provided that the point with reference to which an argument was subsequently advanced was actually decided.

9. In Director of Settlements, Andhra Pradesh and others vs. M.R.Apparao and another, (2002) 4 SCC 638, it was observed that the decision in a judgment of the Supreme Court cannot be assailed on the ground that certain aspects were not considered or the relevant provisions were not brought to the notice of the Court. Their lordships said that when the Supreme Court decides a principle it would be the duty of the High Court or a CWP No. 2550 of 2005 (9)

subordinate court to follow the decision of the Supreme Court. The observations of the Court ( in para 79 ) must be read in the context of which they have been made.

10. Thus, we are of the opinion that merely because the stated objection/ argument had not been specifically urged before the Apex Court, in the manner it has been raised before us, it is not open to the petitioners, to challenge the constitutional validity of the Act on that ground before this Court again. Accordingly, we reject the argument and hold that the question of constitutional validity of the provisions of the Act cannot be re-opened.

Question No. 2

11. The Debts Recovery Tribunal under the RDB Act can be constituted in respect of the amount of debt of more than Rs.1 lac and less than Rs.10 lacs in terms of section 1(4) of the RDB Act, if notified by the Central Government. Since there is no notification constituting the Tribunal in respect of recovery of debts less than Rs.10 lacs, the Debts Recovery Tribunal constituted under the RDB Act exercises jurisdiction over the debts of Rs.10 lacs or more. Under section 3(1) of the Act, the Debts Recovery Tribunal, so established, exercises the jurisdiction, power and authority conferred on such Tribunal under the RDB Act in respect of the areas specified in the notification.

On the basis of such statutory provisions, the argument raised is that the Debts Recovery Tribunal "having jurisdiction" in terms of section 17 of the Act, is the Tribunal constituted for recovery of a debt of Rs.10 lacs or more, therefore, in respect of debt due less than Rs.10 lacs, the Debts Recovery Tribunal has no CWP No. 2550 of 2005 (10)

pecuniary jurisdiction to entertain an application. In support, reliance was placed on a recent Single Bench decision of Delhi High Court in Civil Revision No.242 of 2004 titled State Bank of India vs. Mukesh Jain and another, decided on 16.04.2005.

12. On the other hand, learned counsel representing the respondents have submitted that the Debts Recovery Tribunal having jurisdiction contemplated under section 17 of the Act deals with only territorial jurisdiction of the Tribunal and not the pecuniary jurisdiction, inasmuch as the pecuniary jurisdiction is contemplated under sub-section (4) of Section 1 of the RDB Act.

The Tribunal constituted exercises jurisdiction over the territory notified in terms of Section 3 of the RDB Act. Thus, the Debts Recovery Tribunal having jurisdiction in the matter provided under section 17 of the Act is the Tribunal having territorial jurisdiction over the subject matter. It is argued that for the purposes of section 2(i) of the Act, the provisions of RDB Act constituting the Debts Recovery Tribunal have been "incorporated by reference" and, therefore, pecuniary jurisdiction contemplated under the RDB Act is not relevant. Reference was made to the decisions of the Supreme Court in Bolani Ores Limited vs. State of Orissa, (1974) 2 SCC 777; and Kerala State Road Transport Corporation vs. K.O.Verghese and others, (2003) 12 SCC 293, to contend that the provisions of the RDB Act would be deemed to be incorporated in the Act and therefore, the pecuniary jurisdiction of the Debts Recovery Tribunal under section 1(4) of the RDB Act is not relevant for determining the jurisdiction of the Debts Recovery Tribunal under the Act. It CWP No. 2550 of 2005 (11)

was also urged that section 35 of the Act has an overriding effect over all other laws, which would include RDB Act as well, if those provisions are inconsistent with the provisions of the Act, although there is no such inconsistency in the provisions contained in the two Acts.

13. At this stage, a reference to the relevant statutory provisions would be helpful. These are:

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2000.

" 2. Definitions.--(1) In this Act, unless the context otherwise requires,--

(ha) "debt" shall have the meaning assigned to it in clause (g) of Section 2 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(i) "Debts Recovery Tribunal" means the Tribunal established under sub-section (1) of Section 3 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993); "17. Right to appeal.--(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

" 31. Provisions of this Act not to apply in certain cases.--The provisions of this Act shall not apply to-- xx xx xx xx xx

(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;" CWP No. 2550 of 2005 (12)

xx xx xx xx xx

"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."

Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

"1. Short title, extent, commencement and application.--(1) to (3) xx xx xx xx xx

(4)The provisions of this Act shall not apply where the amount of debt due to any bank or financial institution or to a consortium of banks or financial institutions is less than ten lakh rupees or such other amount, being not less than one lakh rupees, as the Central Government may, by notification, specify".

" Section 2.

"(g) "debt" means any liability (inclusive of interest) which is claimed as due from any person by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application;

(o) "Tribunal" means the Tribunal established under sub- section (1) of section 3."

"3. Establishment of Tribunal.--(1) The Central Government shall by notification, establish one or more Tribunals, to be CWP No. 2550 of 2005 (13)

known as the Debts Recovery Tribunal, to exercise the jurisdiction, powers and authority conferred on such Tribunal by or under this Act.

(2) The Central Government shall also specify, in the notification referred to in sub-section (1), the areas within which the Tribunal may exercise jurisdiction for entertaining and deciding the applications filed before it".

14. A bare reading of the afore-extracted provisions negates the stand of the petitioners that the Debt Recovery Tribunal shall not have jurisdiction to entertain matters under the Act. It is clear that on the basis of doctrine of incorporation by reference, the provisions of section 3 (1) of the RDB Act are deemed to be incorporated in the Act. There may be some debate in regard to the circumstances under which the provisions of a previous Act would become an integral part of the subsequent Act or the provisions of the previous Act were merely cited or referred to in the subsequent Act. But for the purpose of the issues raised in the present proceedings, such distinction is merely academic. The distinction is relevant only if the previous Act is amended, modified or repealed so as to consider the effect of such changes in the previous Act while considering the provisions of the subsequent Act, which is not the case here. Therefore, whether the provisions of the previous Act have been incorporated by reference or have been cited or referred to in the subsequent Act, the legal effect is to write those sections into the new Act as if they have been actually written in it with the pen or printed in it. It was so held by the Hon'ble Supreme Court in the case reported as Bolani Ores Ltd.'s case CWP No. 2550 of 2005 (14)

(supra).

15. In Kerala State Road Transport Corporation's case (supra), Hon'ble Supreme Court had the occasion to examine the concept of legislation by reference or by incorporation. It was held that:- " 30. The legislation by referable incorporation falls into two categories. That is (i) where a statute by specific reference incorporates the provisions of another statute as at the time of adoption, and (ii) where a statute incorporates by general reference. The law concerning a particular subject has a genus. In the former case the subsequent amendments made in the referred statute cannot automatically be read into the adopting statute. But in the second category it may be presumed that the legislative intent was to include all the subsequent amendments also made from time to time in the generic law on the subject adopted by the general reference.

31. In the former case a modification, repeal or re-enactment of the statute that is referred will also have effect on the statute in which it is referred; but in the latter case any change in the incorporation statute by way of amendment or repeal has no repercussion on the incorporating statute. The rule that the repeal or amendment of an Act which is incorporated in a later Act has no effect on the later Act or on the provisions incorporated therein is subject to four exceptions. They are: (i) where the later Act and the earlier Act are supplemental to each other, (ii) where the two Acts are in pari materia, (iii) where the amendment of the earlier Act if not imported in the later Act would render it wholly unworkable, and (iv) where the amendment of the earlier Act either expressly or by necessary intendment also applies to the later Act. Even though only particular sections of an earlier Act CWP No. 2550 of 2005 (15)

are incorporated into the later statute, in construing the incorporated provisions it may be necessary and permissible to refer to other parts of the earlier statute which are not incorporated. This does not however mean that a provision in the nature of a proviso or exception in the earlier Act which is not brought in by incorporation can be read in a manner so as to limit the meaning of the provision incorporated. Reference to other provisions of the earlier statute is only permissible to cull out the meaning of the provision incorporated".( emphasis supplied)

32. In the illuminating words of Lord Esher, M.R.: "If a subsequent Act brings into itself by reference some of the clauses of a former Act, the legal effect of that, as has often been held, is to write those sections into the new Act as if they had been actually written in it with the pen, or printed on it." (See Wood's Estate, Re, ex p Works and Buildings Commrs.

(1886) 31 Ch D 607)

33. It may be added that clear intention of the incorporating Act cannot be defeated by such provision of the earlier Act which have not been incorporated (emphasis supplied). In the interpretation of an incorporated provision, the Court is sometimes required to formulate variations of details in the context of the incorporating statute. (See Mariyappa v. State of Karnataka, (1998) 3 SCC 276). The merit of legislation by incorporation is brevity which is sometimes counterbalanced by difficulties and obscurities which it is likely to create".

16. We are unable to agree with the view taken by the learned Single Judge of Delhi High Court in Mukesh Jain's case (supra), reference to which was made by learned counsel for the petitioner to contend that the Debts CWP No. 2550 of 2005 (16)

Recovery Tribunal will not have the jurisdiction to entertain the matter under the Act. A perusal of the said judgment would show that neither section 31(h) of the Act was brought to the notice of the Court nor the fact that the provisions of the RDB Act stand incorporated by reference in the Act. On the other hand, learned learned Single Judge of Kerala High Court in the case reported as Joseph George vs. Joint Registrar, 2005(2) Important and Selected Judgments (Banking), 402, has taken a view that there is no provision in the Act corresponding to section 1(4) of the RDB Act. Reference was made to the provisions of Section 31(h) of the Act and it was held that the powers conferred on the Debts Recovery Tribunal under the provisions of the Act were over and above that of Tribunal's power conferred under the RDB Act. Therefore, we are of the opinion that the jurisdiction of the Debts Recovery Tribunal under the RDB Act will not have any relevance to determine the question of applicability of the provisions to an application under section 17(1) of the Act. Moreover, as noted above, the Apex Court having upheld the constitutional validity of the Act, it is not open to this Court to re-examine the same matter again. The Court is to consider the problems, if any, in the working of the Act. This Court is to iron out the creases and to smoothen the edges so as to make the Act as a working provision of law.

17. In view of the above discussion, we hold that the Debts Recovery Tribunal constituted under the RDB Act would have the jurisdiction to entertain an application contemplated under section 17 of the Act even in respect of the debt of less than Rs.10 lacs.

CWP No. 2550 of 2005 (17)

Question No.3.

18. By virtue of the amending Act w.e.f. 11.11.2004, the persons aggrieved against the action of the bank or financial institution initiated under section 13(4) of the Act have a right of adjudication by way of an application to the Debts Recovery Tribunal. In exercise of the powers conferred under section 40 (1) of the Act, to make the provisions of levying of the fee for filing of appeals on 6.4.2004, the Central Government issued an order called "The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Removal of Difficulties) Order, 2004" before the decision in Mardia Chemical Limited's case (supra) was rendered on April 08, 2004.

Clause 3 of the said Order provides that the fee for filing of an appeal to the Debts Recovery Tribunal under section 17(1) of the Act shall be mutatis mutandis as provided for filing of an application to the Debts Recovery Tribunal under Rule 7 of the 1993 Rules. Learned counsel for the petitioners have contended that this order was the basis of judgment of Division Bench of this Court in M/s Atma Jain Hosiery Emporium and another vs. Union of India and others, 2005(1) Punjab Law Reporter, 350, but after the amendment in Section 17(1) of the Act, the order issued by the Central Government has become redundant. The amended provisions stipulate filing of an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal. It is further provided that different fees must be prescribed for making an application by the borrower and the person other than the borrower.

Once the Supreme Court has held that the remedy under section 17 of the Act CWP No. 2550 of 2005 (18)

is not an appellate remedy, clause 3 of the Order providing for fee for filing of an appeal under the unamended provisions cannot be made applicable to an application after the amendment was carried out w.e.f. 11.11.2004. It is further argued that sub-section (7) of Section 17 of the Act contemplates that the Debts Recovery Tribunal shall dispose of an application in accordance with the provisions of the RDB Act made thereunder "save as otherwise provided under this Act ". The plea is that since the Act provides for prescribing fee for an application under section 17(1) of the Act, Rule 7 of 1993 Rules under the RDB Act cannot form basis to claim ad valorem court fee in terms of Rule 7 of 1993 Rules.

19. On the other hand, Shri Gurpreet Singh, learned Central Government Counsel, has vehemently contended that the provisions of sub- section (7) of the Act as amended is pari materia with the provisions of sub- section (3) of the unamended Act. Therefore, the Order issued under section 40 of the Act on 6.4.2004 is applicable even after the amendment in Section 17(1) of the Act. It is asserted that in terms of clause 3 of the said Order, the provisions of 1993 Rules are applicable mutatis mutandis to an application even after the amendment. In support, reliance is placed on a Division Bench judgment of Madras High Court in CWP No.13056 of 2005 titled M/s Digivision Electronics Ltd., vs Indian Bank, decided on 7.7.2005, wherein it has been held that ad valorem court fee as required under Rule 7 of 1993 Rules is payable. The learned counsel has placed reliance on Raj Kumari Amrit Kaur vs. Maharani Deepinder Kaur and others, 2001 (3) Punjab Law CWP No. 2550 of 2005 (19)

Reporter 808, Om Parkash vs. Inderawati and others, 2002(2) Punjab Law Reporter 853 and Ranjit Singh vs. Balkar Singh and another, 2000(2) Punjab Law Reporter 382, to contend that in case of suits where the relief is not merely of declaration but is consequential relief, ad valorem court fee is required to be paid. Alternatively, it was argued that the provisions of section 17(1) of the Act can be read down to provide a different fee for a person other than the borrower to avoid hardship to such persons.

20. To appreciate the rival stands, we may notice a few relevant statutory provisions. These are:

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2000.

" 2. Definitions.--(1) In this Act, unless the context otherwise requires,--

(p) "notification" means a notification published in the official Gazette;

(s) "prescribed" means prescribed by rules made under this Act."

"17. Right to appeal.--(1) Any person (including borrower) aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this chapter, may make an application along with such fee, as may be prescribed, to the Debts Recovery Tribunal having jurisdiction in the matter within forty-five days from the date on which such measure had been taken:

Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower.

CWP No. 2550 of 2005 (20)

Explanation.--For the removal of doubts, it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under this sub-section.

(2) to (6) xx xx xx xx xx

(7)Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder."

"18-A. Validation of fees levied.--Any fee levied and collected for preferring, before the commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004, an appeal to the Debts Recovery Tribunal or the Appellate Tribunal under this Act, shall be deemed always to have been levied and collected in accordance with law as if the amendments made to Sections 17 and 18 of this Act by Sections 10 and 12 of the said Act were in force at all material times".

" 38. Power of Central Government to make rules:- (1) The Central Government may, by notification and in the Electronic Gazette as defined in clause (s) of section 2 of the Information Technology Act, 2000 (21 of 2000), make rules for carrying out the provisions of this Act.

(2)In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:-

CWP No. 2550 of 2005 (21)

(a) and (b) xx xx xx xx xx

(ba) the fee for making an application to the Debts Recovery Tribunal under sub-section (1) of section 17; (bb) the form of making an application to the Appellate Tribunal under sub-section (6) of section 17; (bc) the fee for preferring an appeal to the Appellate Tribunal under sub-section (1) of Section 18."

Securitisation and Reconstruction of Financial Assets & Enforcement of Security Interest (Removal of Difficulties) Order, 2004.

"3.Fee for filing of an appeal to Debts Recovery Tribunal:- The fee for filing an appeal to the Debts Recovery Tribunal under sub-section (1) of section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002,shall be mutatis mutandis as provided for filing of an application to the Debts Recovery Tribunal under rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993"

21. Prior to the amendment of the Act on 11.11.2004, section 17 of the Act provided a right of appeal to any person including the borrower aggrieved by any of the measures, referred to in sub-section (4) of section 13 of the Act, taken by a secured creditor. Sub-section (3) contemplated disposal of the said appeal in accordance with the provisions of the RDB Act and the rules made thereunder, save as otherwise provided under the Act. Before the amendment, there was no provision in the Act contemplating payment of fee for the purposes of filing an appeal in terms of Section 17(1) of the Act.

Perhaps, realising this difficulty, the Central Government has issued the Order CWP No. 2550 of 2005 (22)

on 6.4.2004, just two days before the judgment was rendered by the Supreme Court in Mardia Chemical Limited's case (supra). As per the said Order, 1993 Rules were made applicable mutatis mutandis to the appeals to be filed under section 17(1) of the Act. On the basis of these provisions, a Division Bench of this Court in M/s Atma Jain Hosiery Emporium's case (supra), has held that the fee payable on an appeal under section 17(1) of the unamended Act would be the one payable on application under section 19(1) of the Act in terms of Rule 7 of 1993 Rules. In our opinion, in the light of the judgment of the Supreme Court in Mardia Chemical Limited's case (supra) and subsequent amendment in the Act on 11.11.2004, the situation has undergone a drastic change. Now section 17(1) of the Act provides for payment of "prescribed" fees on an application under section 17(1) of the Act. Section 2 (s) defines "prescribed" to mean prescribed by rules made under this Act.

Section 38(2)(ba) of the Act obligates framing of rules to prescribe fee for making an application to the Debt Recovery Tribunal under sub-section (1) of Section 17 of the Act. Admittedly, no rule relating to fee has been framed under the Act. Therefore, sub-section (7) of Section 17 of the Act stipulating disposal of an application in accordance with the provisions of the RDB Act and the rules made therein will not include Rule 7 of 1993 Rules as provision has been made in the Act itself for framing of rule to prescribe court fee in view of the opening words of sub-section (7). Furthermore, according to sub- section (7), the rules of procedure for deciding the application alone would be applicable and not the rule regarding fee which is required to be framed in CWP No. 2550 of 2005 (23)

terms of sub-section (1) of Section 17 read with section 38 (2) (ba) of the Act.

In view of the above, we are of the opinion that the ratio of the decision in M/s Atma Jain Hosiery Emporium's case (supra) is not applicable after the amendment in the Act.

22. In fact, insertion of Section 18-A of the Act, validating the levy and collection of fee before the commencement of the amending Act itself shows that the Order issued by the Central Government on 6.4.2004 has not been validated or incorporated in the statute. It is only collection of fee in pursuance of such Order which has been validated. In the absence of such validation, perhaps, the court fee has to be refunded.

23. The other judgments referred to by learned counsel for the respondents have no applicability to the facts of the present case. They deal with the provisions of Section 7(iv)(c) of the Court Fees Act, 1870, in respect of suits before a civil Court. In the instant situation, firstly, the action is not before a civil court. Secondly, the relief is not for any declaration with or without consequential relief. The challenge is to the action taken by the secured creditor by way of an application before an adjudicating authority. There is no gain saying that the scope of dispute before a civil Court is materially different from the scope of an adjudication by the Tribunal on an application filed by a person aggrieved against the action of the authorised officer. It is not within the domain of this Court to prescribe a different court fee to be affixed by a person other than the borrower by reading down the provisions of the Act. The concept of reading down is used for a limited purpose of making a particular CWP No. 2550 of 2005 (24)

provision workable and to bring it in harmony with other provisions of the statute. It is not open to read words and expressions not found in it and thus venture into a kind of judicial legislation. On this aspect a reference to the decision of the Supreme Court in Calcutta Gujarati Education Society vs.

Calcutta Municipal Corporation, (2003) 10 SCC 533, would be apposite.

24. With respect, we are unable to subscribe to the view taken by the Madras High Court in M/s Digivision Electronics Limited's case (supra), wherein it has been held that ad valorem court fee would be payable in view of Clause 3 of the Order issued by the Central Government on 6.4.2004.

Apparently, the amended provisions of sub-section (1) of section 17 and that of sub-section (7) were not brought to the notice of the Court. The said provisions make the order issued by the Central Government on 6.4.2004 redundant and inapplicable in view of the clear legislative intent apparent in the amending Act.

25. The question which now arises is as to what should be the fee payable on the application filed before the Debts Recovery Tribunal under section 17(1) of the Act. Such an application is neither an application for recovery of debts due under section 19(1) or 19(2) of the Act nor is a counter claim under section 19(8) of the Act. As observed by their Lordships of the Supreme Court in Mardia Chemical Limited's case (supra), it is an initial action which is brought before a forum as prescribed under the Act. It has been held that the proceedings under section 17 of the Act are in lieu of a civil suit which remedy is ordinarily available but for the bar under section 34 of the Act.

CWP No. 2550 of 2005 (25)

We are, therefore, of the considered view that in the absence of any fee prescribed in terms of section 17(1) of the Act, the fee payable could be the fee payable on an application filed for interlocutory order in terms of clause 4 of Rule 7 of 1993 Rules as the application is to the Debts Recovery Tribunal.

Accordingly, we hold that an application under section 17(1) of the Act would be maintainable on payment of a fixed court fee of Rs.250/- till the rules are made in terms of Section 17(1) of the Act.

Question No.4

26. It is argued that the banks or financial institutions cannot be permitted to avail of the remedy under the Act when they have already invoked the jurisdiction of RDB Act for a debt of Rs.10 lacs or more and of civil Court for an amount less than Rs.10 lacs but over Rs.1 lac. It is urged that sub- section (10) of section 13 of the Act gives liberty to the banks or financial institutions, if the dues of the secured creditors are not fully satisfied with the sale proceeds of the secured assets, to avail the remedy of Debt Recovery Tribunal having jurisdiction or in a competent court, as the case may be, for recovery of the balance amount from the borrower. It is, thus, contended that the remedy contemplated under the RDB Act is only in the case of shortfall i.e., after the sale proceeds of the secured assets have been accounted for. It is asserted that once the proceedings under the RDB Act or in the civil court have been initiated, the banks or the financial institutions cannot initiate proceedings under the Act without withdrawing or abandoning the proceedings under the aforesaid provisions of law.

CWP No. 2550 of 2005 (26)

27. Reference is also made to proviso to Section 19 of the RDB Act which provides that the banks or financial institutions may withdraw the application with the permission of the Debt Recovery Tribunal made before or after the Amending Act for the purpose of taking action under the Act if no such action is taken earlier under the Act. It is, thus, pleaded that it is mandatory for the banks to withdraw the application before the Debts Recovery Tribunal before initiating action under the Act. It is urged that the legislative intent in this respect is apparent as the second proviso provides for expeditious disposal of the application and the third proviso postulates recording of reasons for declining such an application by the banks or financial institutions.

Reference was also made to Para 6 of the Statement of Objects and Reasons when the Bill to amend the Act was introduced. The said Para reads as under:- " 6. Chapter III of the Ordinance amends the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, so as to enable the bank or financial institution to withdraw, with the permission of the Debts Recovery Tribunal, the application made to it and thereafter take action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002."

28. Drawing support from the said para, it is contended that proviso to section 19 has been introduced to enable the bank or financial institution to withdraw the original application before the Debts Recovery Tribunal under the RDB Act and "thereafter take action under the Act".

29. In support, reliance is placed upon the decision of the Supreme CWP No. 2550 of 2005 (27)

Court in the case of A.P.State Financial Corporation vs. M/s Gar Re- Rolling Mills and another, (1994) 2 SCC 647, wherein the doctrine of election was applied in respect of the remedies under sections 29 and 31 of the State Financial Corporation Act, 1951. It was held that the State Financial Corporation can seek remedy under section 29 of the State Financial Corporation Act, 1951, after abandoning the proceedings under section 31 of the Act. Reliance is also placed upon Full Bench decision of this Court reported as Sukhi Ram vs. State of Haryana, 1982 Punjab Law Reporter 717, wherein the doctrine of election has been applied in respect of a right of an employee to elect his remedy available under the Industrial Disputes Act, 1947, or under the common law before the civil Court.

30. Per contra, learned counsel for the respondents have submitted that the provisions of Section 19(1) of the Act are directory. It does not affect any of the rights of the borrower as the Debts Recovery Tribunal has the jurisdiction to pass an appropriate order in terms of sub-section (25) of Section 19 of the Act, even if such proceedings are filed and/ or are pending. In exercise of such jurisdiction, the Debts Recovery Tribunal can stay further proceedings in respect of an application filed by the bank for recovery of the amount. Even in case of shortfall of the amount recovered under the Act, the banks or the financial institutions have to invoke the jurisdiction of the RDB Act in terms of Section 13(10) of the Act. Therefore, the provision has to be harmoniously construed and mere pendency of application before the Debts Recovery Tribunal will not bar the banks or financial institutions to seek their CWP No. 2550 of 2005 (28)

remedy under the Act. To buttress the argument, reliance is also placed on a Division Bench judgment of the Kerala High Court in Abdul Azeez vs.

Punjab National Bank, 2005(1) ISJ (Banking) 363, wherein it has been held that the provisions of the Act are in addition to and not in derogation of other laws. It was found that remedy under the Act is an additional remedy which, unless barred by the statute can be enforced at any time. It is argued that the doctrine of election would be applicable only if one Act provides two remedies and not in respect of the multiple remedies under different statutes. It is also contended that the Debts Recovery Tribunal is an adjudicating authority, whereas the Act provides for an executory mechanism and, therefore, the provisions of both the Acts operate in different fields.

31. Before proceeding further, a reference to the following statutory provisions would be helpful:-

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2000.

"13. Enforcement of security interest.--(1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the court or tribunal, by such creditor in accordance with the provisions of this Act.

(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:--

CWP No. 2550 of 2005 (29)

xx xx xx xx xx

x x xx xx xx xx

(10)Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court, as the case may be, for recovery of the balance amount from the borrower.

Xx xx xx xx xx"

Recovery of Debts Due to Banks and Financial Institutions Act, 1993.

" 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,--

(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; 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 earlier under that Act : Provided further that any application made under the first proviso CWP No. 2550 of 2005 (30)

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."

32. The doctrine of election is a rule of estoppel. It is an obligation imposed upon a party by the Court of equity to choose between two inconsistent or alternative rights or claims. This principle stated in White and Tudor's Leading Cases in Equity Volume 18th Edition, at page 444, was quoted

with approval by the Supreme Court in a judgment reported as C.Beepathumma and others vs. Velasari Shankaranarayana Kadambolithaya and others, AIR 1965 SC 241. It was to the following effect:-

" 17. The doctrine of election which has been applied in this case is well-settled and may be stated in the classic words of Maitland --

"That he who accepts a benefit under a deed or will or other instrument must adopt the whole contents of that instrument, must conform to all its provisions and renounce all rights that are inconsistent with it."

(see Maitland's lectures on Equity Lecture 18) The same principle is stated in White and Tudor's Leading Cases in Equity Vol. 18th Edn. at p. 444 as follows: "Election is the obligation imposed upon a party by courts of CWP No. 2550 of 2005 (31)

equity to choose between two inconsistent or alternative rights or claims in cases where there is clear intention of the person from whom he derives one that he should not enjoy both.... That he who accepts a benefit under a deed or will must adopt the whole contents of the instrument."

33. In A.P. State Financial Corporation's case (supra), while dealing with the provisions of Sections 29 and 31 of the State Financial Corporation Act, 1951, the Apex Court has found that a State Financial Corporation has two remedies available to it against the defaulting industrial concern. The choice for availing the remedy is that of the State Financial Corporation alone. Yet, it cannot simultaneously initiate and take recourse to the remedy available to it under section 29 unless it gives up, abandons or withdraws the proceedings under section 31 of the State Financial Corporation, Act, 1951.

34. A Full Bench of this Court in the case reported as Sukhi Ram vs. State of Haryana, 1982 Punjab Law Reporter, 717, had the occasion to consider the question of jurisdiction of the civil Court where an industrial worker had been dismissed from service. It was observed that dismissal or removal of the workman employed in the State Roadways department raises a dispute arising out of the rights or liabilities accruing to him under the general or common law. Even if the Industrial Disputes Act were not to be on the statute book, the workman can resort to his ordinary civil rights in civil Courts for redressal of any grievance. It was found that the rights or liabilities invoked before the civil Court are not the mere creature of the Industrial Disputes Act CWP No. 2550 of 2005 (32)

but de hors the same. However, if the dispute is an industrial dispute arising out of rights or liabilities under the general or common law and under the Industrial Disputes Act, the jurisdiction of the civil Court is alternative, leaving it to the election of the aggrieved employee to choose its remedy. It was held that it is the discretion of the workman to either resort to the ordinary jurisdiction of the civil Court or to seek remedies under the Industrial Disputes Act, 1947. He must distinctly elect his remedy. He is to choose one or the other. The Court concluded to the following effect:- " 10. Coming now to the second distinct category where the right or obligation giving rise to the industrial dispute springs from a source other than the Act that is, under the general law (including therein any other statutes) then under principle (2) the workman is expressly given two alternative remedies. In such a case, it is in his discretion to either make resort to the ordinary jurisdiction of the civil Courts or to seek the remedies under the Act. However, he must distinctly elect his remedy. It is now authoritatively settled that he cannot have both. He is to choose one or the other"

35. It is not in dispute that the Act provides for a remedy to the bank or the financial institution to recover its debts restricted to secured assets. The proceedings under the RDB Act are not only in respect of the secured assets but against the person as well. Therefore, in respect of secured assets, the bank or the financial institution has two parallel remedies. The scheme of the two Acts is suggestive of the fact that the proceedings under the Act are for expeditious recovery of secured assets without the intervention of any Court or Tribunal.

CWP No. 2550 of 2005 (33)

The Act provides a remedy to an aggrieved person to move an appropriate application to the Debts Recovery Tribunal for adjudication in respect of any dispute sought to be raised by him. Though the scope and operation of the two statutes is different but both lead to a common goal of recovery of debts due to banks or financial institutions. Therefore, out of two parallel remedies, the bank or the financial institution has to elect its remedy.

36. The argument that the doctrine of election has no applicability if the remedy is provided under different statutes does not appeal to us. It is an admitted stand that both the Acts are complimentary to each other and are to achieve the common objective i.e., recovery of debts payable to the banks.

Therefore, as noted above, the bank or the financial institution must elect its remedy. In fact, proviso to section 19(1) of the RDB Act and that of section 13 (10) of the Act are indicative of the fact that recourse to realisation of secured assets in terms of the Act are prior in time than the recourse to the provisions of recovery of debt under the provisions of RDB Act. The realisation of secured assets has the effect on the recovery certificate which may be granted under the RDB Act. The provisions of the Act have overriding effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of such law in terms of Section 35 of the Act. Therefore, simultaneous action under the RDB Act or before the civil Court when the action under the Act is contemplated is not reasonable and fair.

37. By virtue of the amending Act, three provisos have been inserted CWP No. 2550 of 2005 (34)

in section 19 of the RDB Act. As per the first proviso, the bank or the financial institution has been given liberty to withdraw an application filed under sub- section (1) of section 19 of the RDB Act before the Debts Recovery Tribunal, whether made before or after the amending Act i.e., 11.11.2004 to enable the bank or the financial institution to take action under the Act. The controversy in the instant cases arises in respect of two words used in the first proviso, namely, the word "may" and then " if no such action had been taken earlier under that Act". The use of word "may" does not make the proviso directory. It is in the discretion of the bank or the financial institution to withdraw the application or not. Once, the Bank decides to proceed under the Act, the Act imposes an obligation on the bank or the financial institution to withdraw an application under section 19 of the RDB Act.

38. The first proviso to Section 19 gives statutory recognition to the doctrine of election which contemplates that one remedy can be taken in respect of one action. Such intention can be gathered from Para 6 of the Statement of Objects and Reasons as well as from the provisions of sub-section (10) of Section 13 of the Act which contemplates filing of an application for recovery of the shortfall after secured assets in terms of the Act has been realised. The second and the third provisos to Section 19 of the RDB Act also contemplate an expeditious decision on an application for withdrawal of the application made under the provisions of section 19(1) to enable the bank to have action under the Act. Thus, we hold that though it is discretionary for the Bank to proceed under the Act, but if the bank or the financial institution chooses to CWP No. 2550 of 2005 (35)

take recourse to the Act, it is mandatory for the bank or the financial institution as the case may be, to withdraw its application made to the Debts Recovery Tribunal.

39. The words appearing in the first proviso "if no such action had been taken earlier under that Act" are recognition of the fact that proceedings under the Act can be initiated only once. The concluding words " that Act" refers to 2002 Act. Thus, a conjoint reading of the provisions makes it clear that if the bank has filed an application for recovery under section 19 of the RDB Act, either before or after 11.11.2004, it has the liberty to take recourse to the provisions of the Act for realisation of secured assets, provided no action for recovery in terms of the Act has been taken earlier. In the absence of statutory notice under section 13(2) of the Act, no measure can be taken under section 13(4) of the Act. A notice under section 13(2) of the Act is a pre- requisite for an action under sub-section (4) of Section 13 of the Act. The bank or the financial institution is required to withdraw an application filed under section 19 of the RDB Act before the Debts Recovery Tribunal before initiating any proceedings under the Act. Similarly, the bank would have liberty to withdraw the suit pending before the Civil Court in respect of debts less than Rs.10 lacs with permission to the said court. Therefore, we are not inclined to accept the plea of the respondents that it is open to Bank or financial institution to simultaneously take recourse to two parallel remedies.

The judgment of the Kerala High Court shows that it relies upon Section 37 of the Act to hold that the remedy provided is additional remedy, CWP No. 2550 of 2005 (36)

which can be invoked unless specifically barred. It is, thus, apparent that remedy under the Act has been found as an additional remedy. Once it is an additional remedy, the doctrine of election has to be applied. The said aspect had not been brought to the notice of the Court.

40. Thus, we conclude that the bank or financial institution has to elect its remedy to either proceed under the RDB Act or to withdraw such proceedings to enable them to initiate action under the Act.

QUESTION NO.5

41. To appreciate the arguments raised by learned counsel for the parties, reference to the following statutory provisions would be necessary:- The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2000.

"Section 13 (4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-- (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset;

(b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset : Provided that the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt : Provided further that where the management of whole of the CWP No. 2550 of 2005 (37)

business or part of the business is severable, the secured creditor shall take over the management of such business of the borrower which is relatable to the security for the debt; ( c ) appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor; (d) require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.

x x xx xx xx xx"

"(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset."

"8. Sale of immovable secured assets:- (1) Where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice prepared as nearly as possible in Appendix IV to these rules, to the borrower and by affixing the possession notice on the outer door or at such conspicuous place of the property.

(2)The possession notice as referred to in sub-rule (1) shall also be published in two leading newspaper, one in vernacular language having sufficient circulation in that locality, by the authorised officer.

(3)In the event of possession of immovable property is actually taken by the authorised officer,such property shall be kept in CWP No. 2550 of 2005 (38)

his own custody or in the custody of any person authorised or appointed by him, who shall take as much care of the property in his custody as a owner of ordinary prudence would, under the similar circumstances, take of such property." "9. Time of sale, issue of sale certificate and delivery of possession etc- (1) to (5) xx xx xx xx

(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issued a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.

(7) Where the immovable property sold is subject to any encumbrances, the authorised officer may, if he thinks fit, allow the purchaser to deposit with him the money required to discharge the encumbrances and any interest due thereon together with such additional amount that may be sufficient to meet the contingencies or further cost, expenses and interest as may be determined by him.

(8) On such deposit of money for discharge of encumbrances, the authorised officer may issue or cause the purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make the payment accordingly.

(9) The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in sub-rule (7) above.

(10) The certificate of sale issued under sub-rule (6) shall specifically mention that whether the purchaser has purchased the immovable secured asset free from any encumbrances known to the secured creditor or not".

CWP No. 2550 of 2005 (39)

42. 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 a 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 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 or a property which is lying unattended, but where the immovable CWP No. 2550 of 2005 (40)

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 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.

43. 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 the sale is confirmed in terms of Rule 9, particularly sub-rule (9) of Rule 9 of Security Interest (Enforcement) Rules, 2002.

Conclusions

44. In view of the discussion and findings recorded above, in so far as the present case is concerned, the writ petition is allowed; the impugned order (Annexure P-32) is quashed and Rule is made absolute. Consequently, we direct the Debts Recovery Tribunal to entertain and decide the appeal/ application of filed by the petitioners in accordance with law, on payment of a fixed court fee of Rs.250/-. However, in the circumstances of the case, there will be no order as to costs.

CWP No. 2550 of 2005 (41)

45. The parties, through their counsel, are directed to appear before the Debts Recovery Tribunal, Chandigarh, on 9.1.2006 for further proceedings.

46. All other writ petitions shall be listed on 15.12.2005 for further directions in view of our above judgment.

( D.K.Jain )

Chief Justice

December 8, 2005 ( Hemant Gupta )

ks Judge


Copyright

Reproduced in accordance with s52(q) of the Copyright Act 1957 (India) from judis.nic.in, indiacode.nic.in and other Indian High Court Websites

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