Sajay Bansal vs Sh. Rakesh K. Ahlawat And Ors.
2005 Latest Caselaw 99 Del

JUDGMENT

S. Ravindra Bhat, J.

1. Issue Rule. With consent of parties, taken up for final hearing.

2. In these proceedings, under Article 226 of the Constitution of India, an appropriate writ/ order has been sought against the respondents from taking over physical possession of portion of first floor property, South Extension Part-I, New Delhi ("the suit property"). The action assailed is under Section 14(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 (hereinafter referred to as the "Securitization Act"). A further direction seeking certiorari against an order dated 1.12.2004 passed by the Chief Metropolitan Magistrate, Delhi in Case No. 232/2004, at the request of the second respondent No. 3 has also been sought.

3. The petitioner claims to be a tenant of the suit property; he alleges that the tenancy was created on 15.5.2001, by an unregistered deed. The pleadings and materials disclose that the tenancy was stated to be for a unlimited period; for a monthly rent of Rs. 2500/-. The lease/tenancy said to have been created on behalf of M/s Eupharma Laboratories Ltd. (hereinafter referred to as the "borrower") through one of its Directors.

4. Notice was issued; and an interim order not to dispossess the petitioner was made on 29.12.2004.

5. The third respondent, which is the financial institution in the case, has averred that the borrower was extended various credit facilities. In order to secure these advances several properties were mortgaged. The suit property was one such item of property, offered as mortgage security; an equitable mortgage was created in that regard on 1.2.1999, prior to the lease relied upon by the petitioner. The third respondent has also averred that notice in terms of Section 13(2) of the Securitisation Act was issued to the borrower on 19.8.2002, requiring repayment of all its debts within the stipulated 60 days period. The borrower apparently responded by letter dated 12.8.2003 expressing willingness on its part to the proposal for taking over of possession, of the suit premises by the third respondent.

6. The third respondent moved the Chief Metropolitan Magistrate some time in June 2004, the order under Section 14 of the Securitization Act; subsequently an was passed on 1.12.2004.

7. Mr. J.P. Singh, learned counsel submits that the existing tenancy rights of the petitioner cannot be jeoparadized or affected in the manner sought to be done. He submits that the petitioner is entitled to protection under the provisions of the Delhi Rent Control Act and that the impugned order directing possession and enabling the third respondent to take over physical possession cannot be sustained.

8. The petitioner has also moved an application being CM No. 824/2005 seeking to amend the writ petition primarily on the premise that the provisions of Securitization Act have since been amended (firstly by an Ordinance and later by an Act, namely the Recovery of Debts Amendment Act, 2004 which came into force on 11.11.2004). Particular reliance has been placed upon the amended proviso to Section 19(1) of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, inserted by the amendment of 2004.

9. Mr. Dial appearing for the third respondent submits that having regard to the provisions of the Securitization Act, and the amendment made to that enactment, the relief sought in these proceedings ought not to be granted, under Article 226 of the Constitution of India. He has also relied upon the judgment of the learned Single Judge dated 4.10.2004 in M/s Institute of Computing and Management v. State Bank of Indore and Ors. In that judgment the aggrieved party was relegated to an appeal in terms of Section 17 of the Securitization Act.

10. The provisions of Securitization Act were considered by the Supreme Court when their validity was challenged, in the judgment Mardia Chemicals Ltd. and Ors. v. Union of India and Ors. . The material portion of that judgment which upheld all provisions [excepting the one requiring pre-deposit of amounts, as a condition of appeal], reads as follows :-

"80. Under the Act in consideration, we find that before taking action a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debts Recovery Tribunal. The abovenoted provisions are for the purpose of giving some reasonable protection to the borrower. Viewing the matter in the above perspective, we find what emerges from different provisions of the Act, is as follows :

"1. Under sub-section (2) of Section 13 it is incumbent upon the secured creditor to serve 60 days' notice before proceeding to take any of the measures as provided under sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act, at that stage.

2. As already discussed earlier, on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal.

3. That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition as it may deem fit and proper to impose.

4. In view of the discussion already held in this behalf, we find that the requirement of deposit of 75% of the amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canone of reasonableness. Such a condition is invalid and it is liable to be struck down.

5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the Court."

11. The judgment of the Supreme Court makes it clear that, inter alia, a decision to take action on any measure under Section 13(4) is appellable to the Debts Recovery Tribunal; the Tribunal, upon being approached would have the power to make an appropriate order, including an interim order.

12. It would appear that after the delivery of judgment (of the Supreme Court) the amendments referred to above, namely the Amending Act of 2004, was enacted. Section 17 of the Securitization Act which enables aggrieved parties to file appeals reads as follows :

"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 measures had been taken:

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

[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 sub-section(1) of section 17.]

[(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section(4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made there under.

(3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section(4) of section 13, taken by the secured creditor are not in accordance with the provisions of his Act and the rules made there under, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may by order, declare the recourse to any one or more measures referred to in-sub-section (4) of section 13 taken by the secured assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13.

(4) If, the Debts Recovery Tribunal declares the recourse taken by a secured creditor under sub-section (4) of section 13, is in accordance with the provisions of this Act and the rules made there under, then, notwithstanding anything contained in any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt.

(5) Any application made under sub-section (1) shall be dealt with by the Debts Recovery Tribunal as expeditiously as possible and disposed of within sixty days from the date of such application:

Provided that the Debts Recovery Tribunal may, from time to time, extend the said period for reasons to be recorded in writing, so, however, that the total period of pendency of the application with the Debts Recovery Tribunal, shall not exceed four months from the date of making of such application made under sub-section (1).

6. If the application is not disposed of by the Debts Recovery Tribunal within the period of four months as specified in sub-section (5), any party to the application may make an application, in such form as may be prescribed, to the Appellate Tribunal for directing the Debts Recovery Tribunal for expeditious disposal of the application pending before the Debts Recovery Tribunal and the Appellate Tribunal may, on such application, make an order for expeditious disposal of the pending application by the Debts Recovery Tribunal.

7. Save as otherwise provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of 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 there under."]

13. A bare reading of the above provision shows that any person aggrieved of any of the measures referred to sub-section (4) of Section 13 (which empowers a secured creditor to inter alia take possession of secured assets) can prefer an appeal. Sub-section (3) of Section 17 which was inserted by the amendment in 2004, expressly authorizes the Tribunal to pass orders including restoration of possession of the secured assets and/or pass such orders as it may be considered appropriate and necessary in relation to any of the action taken by the secured creditors to sub-section 4 of Section 13.

14. The contention raised by Mr. Singh about there being no remedy in case of Section 14 does not appear to be correct in view of the fact that Section 14 is a consequential action; it cannot be exercised in isolation. An order under that section is to be preceded by the various measures outlined in Section 13 which include the issuance of a notice under sub-section (2) and action in terms of sub-section (4).

15. In cases like the present where the borrower or any other person, relying upon some other right, might be aggrieved by a measure or action taken by a secured creditor, Section 17, in my considered opinion affords adequate remedy. The provision of appeal in this case, after the judgment of the Supreme Court is not hedged in with the condition of pre-deposit. Consequently the borrower or the person aggrieved has the right to approach the Tribunal. This view is also in line with the view taken by the learned Single Judge in CWP No. 9085/2003 referred to above.

16. As far as the contention of counsel for the petitioner with regard to the addition of a proviso by the Amendment Act of 2004, to Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (which has been raised by an amendment application) is concerned, the same does not, prima facie, appear to be correct. That proviso would not cover a situation as in the present case. The reason is that the proviso comprehends a situation where action in terms of Section 13 has not been taken, as indicated in the later part of the proviso. Here, action was taken.

17. In view of the above, I decline to interfere with the impugned order. That does however, not bring an end to the matter. The petitioner is at liberty to approach the Debt Recovery Tribunal under Section 17 of the Securitization Act within a period of two weeks from today. The impugned order shall not be given effect to for that period.

18. Mr. Singh submits that Section 14(3), ought not to be considered a bar to the contentions regarding the legality of the move/action of the third respondent, in the appeal under Section 17 of the Securitization Act. Learned counsel for the third respondent does not object to this. The Tribunal is free to consider the application for interim application, and the appeal on its own merits uninfluenced by any observation made in this order, which shall not be construed as an expression on merits of the case of any party.

19. Rule discharged; interim order is vacated in the light of the above order. The petition and the interlocutory application are disposed off in the above terms, with no order as to costs.

20. A copy of the order be given dusty to learned counsel for the parties.