Hindustan Petroleum Corporation ... vs Union Of India Thru. Ministry Of ...
2023 Latest Caselaw 10190 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

AFR
 
High Court of Judicature at Allahabad
 
(Lucknow)
 
************
 
									
 
Reserved on: 27.03.2023
 
Delivered on: 07.04.2023
 

 
Court No. - 3
 
Case :- WRIT - C No. - 2119 of 2023
 
Petitioner :- Hindustan Petroleum Corporation Ltd. Thru. Its Chief Manager
 
Respondent :- Union Of India Thru. Ministry Of Finance Banking Division Deptt. Of Financial Services And 6 Others
 
Counsel for Petitioner :- Aprajita Bansal,Karan Agarwal
 
Counsel for Respondent :- A.S.G.I.,Alok Saxena,Ashwani Kumar Singh,C.S.C.
 
Hon'ble Rajan Roy,J.

Hon'ble Manish Kumar,J.

(Per : Rajan Roy, J.)

Heard Ms. Aprajita Bansal, learned counsel for the petitioner, learned Additional Chief Standing Counsel for the State and learned Alok Saxena, learned counsel for the opposite party no. 4.

By means of this writ petition the petitioner- Hindustan Petroleum Corporation Ltd. has challenged an order dated 09.08.2021 passed by the District Magistrate, Sitapur in Case No. 00745 of 2021; State Bank of India Vs. M/s Shiv Geet Sales Pvt. Ltd. under Section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the SARFAESI Act, 2002').

The contention of the petitioner's counsel in nutshell was that the petitioner was the lessee of the secured asset and that a lease was executed by the borrower in favour of the petitioner much prior to mortgage of the said property by him with the opposite party No. 4- Bank. The lease being registered and the same not having been determined as per the provisions of Section 111 of the Transfer of Property Act, 1882, the Bank erred in proceeding under Section under Section 13 of the SARFAESI Act, 2002 in respect of the said asset and the District Magistrate also erred in passing an order under Section 14 of the SARFAESI Act, 2002 without hearing the petitioner. The submission is that this action is in gross violation of the law declared by Hon'ble the Supreme Court in the Case of Harshad Govardhan Sondagar Vs. International Assets Reconstruction Company Limited and Ors. reported in (2014) 6 SCC 1 and subsequent decision in the case of Bajranj Shyamsunder Agarwal Vs. Central Bank of India and Another reported in (2019) 9 SCC 94.

Learned counsel for the Bank on the other hand submitted that the petitioner has a remedy under Sub-section (1) and (4A) of Section 17 of the SARFAESI Act, 2002, therefore, in view of catena of decisions on the subject right from the case of United Bank of India Vs. Satyawati Tandon and Ors. reported in (2010) 8 SCC 110; Kanaiyalal Lalchand Sachdev and Ors. Vs. State of Maharashtra and Ors. reported in (2011) 2 SCC 782, a recent decision rendered by Hon'ble the Supreme Court in SLP Nos. 13241-13242 of 2019; Kotak Mahindra Bank Limited Vs. Dilip Bhosale and in the case of Phoenix Arc Private Limited Vs. Vishwa Bharati Vidya Mandir and Ors. reported in (2022) 5 SCC 345, this writ petition is not maintainable.

This apart, he submitted that the lease in question has been terminated vide notice dated 03.06.2021, which, the petitioner itself has annexed as Annexure No. 3 to the writ petition, according to which, three months notice was given to the petitioner w.e.f. 07.06.2021 and after expiry of which, the lease dated 13.10.2003 shall stand determined/terminated and the petitioner was further asked to deposit lease rent of three months as agreed in terms of the lease dated 13.10.2003. Based on it, he submitted that period of notice expired on 06.09.2021 on which date the lease stood determined. In response, learned counsel for the petitioner submitted that this determination of lease, as alleged, if at all, took place after passing of the impugned order on 09.08.2021, therefore, this is not a material fact for the purposes of adjudicating the validity of the impugned action of the District Magistrate under Section 14 of the SARFAESI Act, 2002. She also contended that the petitioner is in possession of the land in question, therefore, it is gravely prejudiced by the impugned order. She also submitted that no doubt the Debt Recovery Tribunal has the power to restore possession in proceedings under Section 17(2) of the SARFAESI Act, 2002, but, it would be highly unreasonable to first dispossess lessee of the land in question and thereafter to order repossession thereof. She also submitted that in view of the apparent facts of the case remedy under Section 17(1) of the SARFAESI Act, 2002 is not available to the petitioner. In this regard she relies upon the decisions referred by her earlier.

At this stage learned counsel for the Bank submitted that the secured asset comprises of property measuring 8450 square meter, whereas, the petitioner is in possession of only 1600 square meter of land and in any case the lease having been determined the petitioner does not have any case and the decision relied upon Harshad Govardhan Sondagar's case (supra) does not help its cause. He reiterated that all these issues can be seen by the Debt Recovery Tribunal under the SARFAESI Act, 2002.

The decision in the case of Harshad Govardhan Sondagar (supra) was rendered prior to amendment of Section 17 of the SARFAESI Act, 2002, therefore, the proposition laid down therein that so far as a lessee asserting leasehold rights is concerned, there is no remedy under Section 17(1) of the of the SARFAESI Act, 2002 and the remedy lies only before the High Court under Article 226/227 of the Constitution of India, does not apply to cases where the cause of action has arisen after insertion of Sub-section (4A) in Section 17 of the of the SARFAESI Act, 2002. By insertion of Section (4A) any person who claims any tenancy or leasehold rights upon the secured asset can maintain an application under sub-section (1) of Section 17 of the SARFAESI Act, 2002 and the Debt Recovery Tribunal has been vested with power and jurisdiction to examine whether lease or tenancy - (a) has expired or stood determined; or (b) is contrary to Section 65A of the Transfer of Property Act, 1882; (c) is contrary to terms of mortgage; or (d) is created after the issuance of notice of default and demand by the Bank under sub-section (2) of Section 13 of the Act and Debt Recovery Tribunal on being satisfied that tenancy right or leasehold rights claimed in secured asset falls under the sub-clause (a) or sub-clause (b) or sub-clause (c) or sub-clause (d) referred hereinabove, then, notwithstanding anything to the contrary contained in any other law for the time being in force, it may pass such order as it deems fit in accordance with the provisions of the SARFAESI Act, 2002. This amendment was made by the Act 44 of 2016 vide Notification dated 01.09.2016 and is effective from the said date.

Likewise, Bajranj Shyamsunder Agarwal's case (supra) is also a case where cause of action had arisen prior to insertion of Sub-section (4A) in Section 17 of the SARFAESI Act, 2002. Therefore, in view of the above discussions, it can not be said that the petitioner does not have a remedy under Section 17 of the SARFAESI Act, 2002. The legal position is very well settled by a catena of decisions of Hon'ble the Supreme Court that in such matters, considering the object behind the SARFAESI Act, 2002, the High Court would not be justified in entertaining a writ petition directly under Article 226 of the Constitution of India challenging an order under Section 14 of the SARFAESI Act, 2002 as the remedy is under Section 17 of the SARFAESI Act, 2002. We see no reason to entertain this writ petition at this stage under Article 226 of the Constitution of India.

As far as the contention of learned counsel for petitioner that the petitioner was not heard, we do not wish to express any opinion on this score also, as, we are not entering into the merits of the issues involved, but, suffice it is say that the proceedings under Sections 14 of the SARFAESI Act, 2002 are non adjudicatory which can be challenged under Section 17 of the SARFAESI Act, 2002 and the petitioner may raise all relevant issues including the aforesaid, before the Debt Recovery Tribunal under Section 17 of the SARFAESI Act, 2002. We may in this context refer to a recent decision rendered by Hon'ble the Supreme Court on 26.09.2022 in Special Leave Petition No. 16013 of 2022; Balakrishna Rama Tarle Dead Thr. LRS and Anr. Vs. Phoenix ARC Private Limited and Ors. wherein after considering the provisions of Section 14 of the SARFAESI Act, 2002 it has been held as under:-

"On a fair reading of Section 14 of the SARFAESI Act, it appears that for taking possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the District Magistrate/Chief Metropolitan Magistrate by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action.

The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As observed and held by this Court in the case of NKGSB Cooperative Bank Limited Vs. Subir Chakravarty & Ors. (Civil Appeal No. 1637/2022) decided on 25.02.2022, the aforesaid act is a ministerial act. It cannot brook delay. Time is of the essence and this is the spirit of the special enactment. In the recent decision in the case of M/s R.D. Jain and Co. Vs. Capital First Ltd. & Ors. (Civil Appeal No. 175/2022) decided on 27.07.2022, this Court had an occasion to consider the powers exercisable by District Magistrate/Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. After considering the object and purpose of Section 14 of the SARFAESI Act and the Scheme of the Act under Section 14, it is observed and held in paragraphs 7 to 9 as under:-

"7. Now so far as the powers exercisable by DM and CMM under Section 14 of the SARFAESI Act are concerned, statement of objects and reasons for which SARFAESI Act has been enacted reads as under:-

"STATEMENT OF OBJECTS AND REASONS

The financial sector has been one of the key drivers in India's efforts to achieve success in rapidly developing its economy. While the banking industry in India is progressively complying with the international prudential norms and accounting practices there are certain areas in which the banking and financial sector do not have a level playing field as compared to other participants in the financial markets in the world. There is no legal provision for facilitating securitisation of financial assets of banks and financial institutions. Further, unlike international banks, the banks and financial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of nonperforming assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia, have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21st June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The provisions of the Ordinance would enable banks and financial institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce nonperforming assets by adopting measures for recovery or reconstruction."

Thus, the underlying purpose of the SARFAESI Act is to empower the financial institutions in India to have similar powers as enjoyed by their counterparts, namely, international banks in other countries. One such feature is to empower the financial institutions to take possession of securities and sell them. The same has been translated into provisions falling under Chapter III of the SARFAESI Act. Section 13 deals with enforcement of security interest. Sub-Section (4) thereof envisages that in the event a default is committed by the borrower in discharging his liability in full within the period specified in subsection (2), the secured creditor may take recourse to one or more of the measures provided in subsection (4). One of the measures is to 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. That, they could do through their "authorised officer" as defined in Rule 2(a) of the Security Interest (Enforcement) Rules, 2002.

7.1 After taking over possession of the secured assets, further steps to lease, assign or sale the same could also be taken by the secured creditor. However, Section 14 of the SARFAESI Act predicates that if the secured creditor intends to take possession of the secured assets, must approach the CMM/DM by way of an application in writing, and on receipt of such request, the CMM/DM must move into action in right earnest. After passing an order thereon, he/she (CMM/DM) must proceed to take possession of the secured assets and documents relating thereto for being forwarded to the secured creditor in terms of Section 14(1) read with Section 14(2) of the SARFAESI Act. As noted earlier, Section 14(2) is an enabling provision and permits the CMM/DM to take such steps and use force, as may, in his opinion, be necessary.

7.2 At this stage, it is required to be noted that along with insertion of sub-section (1A), a proviso has also been inserted in sub-section (1) of Section 14 of the SARFAESI Act whereby the secured creditor is now required to comply certain conditions and to disclose that by way of an application accompanied by affidavit duly affirmed by its authorised officer in that regard. Sub-Section (1A) is in the nature of an explanatory provision and it merely restates the implicit power of the CMM/DM in taking services of any officer subordinate to him. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the insertion of sub-section (1A) is not to invest a new power for the first time in the CMM/DM as such.

8. Thus, considering the scheme of the SARFAESI Act, it is explicit and crystal clear that possession of the secured assets can be taken by the secured creditor before confirmation of sale of the secured assets as well as post-confirmation of sale. For taking possession of the secured assets, it could be done by the "authorised officer" of the Bank as noted in Rule 8 of the Security Interest (Enforcement) Rules, 2002.

8.1 However, for taking physical possession of the secured assets in terms of Section 14(1) of the SARFAESI Act, the secured creditor is obliged to approach the CMM/DM by way of a written application requesting for taking possession of the secured assets and documents relating thereto and for being forwarded to it (secured creditor) for further action. The statutory obligation enjoined upon the CMM/DM is to immediately move into action after receipt of a written application under Section 14(1) of the SARFAESI Act from the secured creditor for that purpose. As soon as such an application is received, the CMM/DM is expected to pass an order after verification of compliance of all formalities by the secured creditor referred to in the proviso in Section 14(1) of the SARFAESI Act and after being satisfied in that regard, to take possession of the secured assets and documents relating thereto and to forward the same to the secured creditor at the earliest opportunity. As mandated by Section 14 of the SARFAESI Act, the CMM/DM has to act within the stipulated time limit and pass a suitable order for the purpose of taking possession of the secured assets within a period of 30 days from the date of application which can be extended for such further period but not exceeding in the aggregate, sixty days. Thus, the powers exercised by the CMM/DM is a ministerial act. He cannot brook delay. Time is of the essence. This is the spirit of the special enactment. As observed and held by this Court in the case of NKGSB Cooperative Bank Ltd. (supra), the step taken by the CMM/DM while taking possession of the secured assets and documents relating thereto is a ministerial step. It could be taken by the CMM/DM himself/herself or through any officer subordinate to him/her, including the advocate commissioner who is considered as an officer of his/her court. Section 14 does not oblige the CMM/DM to go personally and take possession of the secured assets and documents relating thereto. Thus, we reiterate that the step to be taken by the CMM/DM under Section 14 of the SARFAESI Act, is a ministerial step. While disposing of the application under Section 14 of the SARFAESI Act, no element of quasi-judicial function or application of mind would require. The Magistrate has to adjudicate and decide the correctness of the information given in the application and nothing more. Therefore, Section 14 does not involve an adjudicatory process qua points raised by the borrower against the secured creditor taking possession of secured assets.

9. Thus, in view of the scheme of the SARFAESI Act, more particularly, Section 14 of the SARFAESI Act and the nature of the powers to be exercised by learned Chief Metropolitan Magistrate/learned District Magistrate, the High Court in the impugned judgment and order has rightly observed and held that the power vested in the learned Chief Metropolitan Magistrate/learned District Magistrate is not by way of persona designata."

It thereafter went on to observe as under:-

"Thus, the powers exercisable by CMM/DM under Section 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets. In that view of the matter once all the requirements under Section 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner. At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings under Section 17 of the SARFAESI Act, before Debts Recovery Tribunal."

In view of the above discussion, leaving it open for the petitioner to avail the said remedy, we dismiss this writ petition as not maintainable.

 (Manish Kumar,J.)     (Rajan Roy, J.)
 
Order Date :- 07.4.2023
 
R.K.P.