The Authorised Officer Of Bank Of ... vs M/S Sarjay Chemicals Pvt. Ltd
2021 Latest Caselaw 16583 Guj

     C/SCA/1352/2020                            JUDGMENT DATED: 22/10/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD


              R/SPECIAL CIVIL APPLICATION NO. 1352 of 2020
                                  With
             CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2020
                                    In
               R/SPECIAL CIVIL APPLICATION NO. 1352 of 2020
                                  With
               R/SPECIAL CIVIL APPLICATION NO. 5932 of 2020
                                  With
              R/SPECIAL CIVIL APPLICATION NO. 15831 of 2020
                                  With
              R/SPECIAL CIVIL APPLICATION NO. 22597 of 2019


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE BHARGAV D. KARIA
==========================================================

1     Whether Reporters of Local Papers may be allowed
      to see the judgment ?

2     To be referred to the Reporter or not ?

3     Whether their Lordships wish to see the fair copy
      of the judgment ?

4     Whether this case involves a substantial question
      of law as to the interpretation of the Constitution
      of India or any order made thereunder ?

==========================================================
              THE AUTHORISED OFFICER OF BANK OF BARODA
                                Versus
                    M/S SARJAY CHEMICALS PVT. LTD.
==========================================================
Appearance:
MS NALINI S LODHA(2128) for the Petitioner(s) No. 1
MR. SANDIP C BHATT(6324) for the Respondent(s) No. 1,2,3
NOTICE UNSERVED(8) for the Respondent(s) No. 4
==========================================================

    CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                            Date : 22/10/2021
                            ORAL JUDGMENT

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

1. Heard learned Senior Advocate Mr. Percy Kavina assisted by learned advocate Mr. Nalini Lodha for Bank of Baroda, learned advocate Mr. S.P.Majmudar for the petitioners in Special Civil Application No. 5932 of 2020, learned advocate Mr. A.B.Munshi for the petitioners in Special Civil Application No. 15821 of 2020 and learned advocate Mr. Sandip Bhatt for the respondent-M/s. Sarjay Chemicals Pvt. Ltd.

2. All these petitions are pertaining to the same issue and therefore, the same are heard analogously and are disposed of by this common order.

3. The brief facts of the case are that one M/s.

Sarjay Chemicals Private Limited availed financial assistance from the respondent-Bank of Baroda in the year 2015 comprising of term loan of Rs. 650 lakh and cash credit of 100 lakh against the security by way of hypothciation of plant and machinery, stock and book-debts and mortgage of immovable properties being factory land and building situated at GIDC, Phase-II, Dahej, Dist. Bharuch and other properties belonging to the directors of the said company.

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

4.Bank of Baroda declared the loan account as NPA on 31.10.2018 upon default of payment of installment of term loan and regular payment in the cash credit account and issued notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ['SARFAESAI Act' for short] calling upon the company and its director to pay a sum of Rs. 5,42,74,562.52 with accrued interest and cost.

5.Objections were raised by the borrower company and after rejecting the same, symbolic possession of the secured assets were taken over by the bank in the month of February 2019.

6.Securitisation Application No. 91 of 2019 was filed before the Debt Recovery Tribunal ['DRT']-I at Ahmedabad who issued the notice upon the bank returnable on 14.06.2019.

7.During the pendency of the Securitization Application, the bank took over the physical possession of the unit on 26th September,2019 as no interim relief was granted by the DRT.

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

8.The Securitization Application No. 91/2019 filed by the borrower-company was preponed 03.10.2019 as amended application was filed to challenge the action of the bank taking physical possession and seek relief for restoration of the physical possession of the unit of the borrower company.

9.The Presiding Officer of the DRT passed an order on 07.10.2019 directing the bank to restore the physical possession of the unit at 8:00 am on 08.10.2019 and adjourned the securitization application for filing a reply by the bank to the amendment application.

10. The respondent-Bank thereafter filed Special Civil Application No. 17638 of 2019 on 09.10.2019 before this Court. This Court by order dated 09.10.2019 stayed operation of the order dated 07.10.2019 till the bank availed the remedy by way of appeal before the Debt Recovery Appellate Tribunal ['DRAT' for short] at Mumbai within a period of two weeks.

11. The respondent-bank thereafter filed appeal before the DRAT, Mumbai being Appeal No. 90 of 2019 with Application [For Stay] No. 790 of 2019.

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

12. The respondent-bank also filed an Application No. 780 of 2019 for urgent interim relief on 20.10.2019 which was granted by the Appellate Tribunal.

13. In the meanwhile, the borrower preferred Interim Application No. 2583 of 2019 in Securitization Application No. 91 of 2019 before the DRT for appointment of the Court Commissioner for taking physical possession of the property from the respondent-bank and to hand over the same on the ground that there was no stay of the order of DRT. The borrowers also filed Miscellaneous Civil Application No. 1 of 2019 in Special Civil Application No. 17638 of 2019 for recall or modification of the order dated 09.10.2019 which was before this Court which came to be dismissed vide order dated 25.11.2019.

14. The Debt Recovery Appellate Tribunal ['DRAT'], during the course of hearing of the Stay Application No. 790 of 2019, called upon the petitioner to explain as to whether bank can proceed under the SARFAESAI Act when securitization application was pending and the matter was sub judice as well as as to whether once the symbolic possession is taken by the bank whether the bank can take the

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

physical possession under section 13(4) of the SARFAESAI Act?

15. The respondent-bank published notice for auction scheduled on 17.12.2019 however, the same was quashed by the DRT in the pending Securitization Application No. 91 of 2019 on the ground that the bank did not place on record copy of the personal sale notice served upon the borrowers.

16. The respondent-bank filed Special Civil Application No. 22597 of 2019 challenging the order dated 17.12.2019 passed by the DRT wherein this Court [Coram: Hon'ble Mr. Justice Vipul Pancholi] passed the following order on 18.12.2019:

"1. Heard learned senior counsel Mr.Kavina for the petitioners. This petition is listed pursuant to the request made by learned advocate for the petitioner for circulation. At the outset, learned senior counsel submitted that the impugned order passed by the Tribunal is not available. However, it is submitted that the Tribunal has quashed and set aside the e-auction sale notice produced at page no.41 of the compilation on the ground that the notice was not personally served to the private respondents. It is further submitted that in the meantime, yesterday, auction of two properties is already held. At this stage, learned senior counsel has also

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

referred to the provisions contained in Rule 9(3) of the The Security Interest (Enforcement) Rules, 2002 and submitted that as per the said provision, 25% of the bid amount is required to be accepted on the same day or not later than the next working day. It is, therefore, urged that subject to outcome of the further proceedings, the petitioner be permitted to accept 25% of the bid amount.

2. In view of the aforesaid submissions canvassed by learned senior counsel appearing for the petitioner, the petitioner is permitted to accept 25% of the bid amount subject to the outcome of this petition. Stand over to 19.12.2019. Direct service today is permitted."

17. The DRAT, by order dated 08.01.2020, dismissed the Appeal No. 90 of 2019 filed by the respondent-bank confirming the order passed by the DRT on 07.10.2019 in Securitization Application No. 91 of 2019 for restoration of the possession of the Unit.

18. The respondent-bank has preferred Special Civil Application No. 1352 of 2020 challenging the order passed by the DRAT

of 2019.

19. As this Court permitted the bank to accept 25% of the amount from the auction purchaser as per the order dated 18.12.2019

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

passed in Special Civil Application No. 22597 of 2019 the auction purchaser made the payment of Rs. 66.50 lakh and thereafter, preferred Special Civil Application No. 5932 of 2020 with following prayers:

"(A) YOUR LORDSHIPS may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction directing the respondent no.l-bank not to forfeit 25% of the Bid Amount, i.e. Rs.66,50,000/-paid by the petitioners and may further be pleased to extend the outer time limit for deposit of remaining 75% of Bid Amount, i.e.Rs.1,99,50,000/-till the time the respondent-bank executes sale deed / sale certificate in favor of the petitioners and hands over physical possession of property in question to the petitioners in the peculiar facts and circumstances of the Present case;

ALTERNATIVELY

(A) YOUR LORDSHIPS may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction directing the respondent no.l-bank to refund 25% of the Bid Amount paid by petitioners, i.e. Rs.66,50,000/-to the petitioners with interest;

(B) YOUR LORDSHIPS may be pleased to issue a writ of mandamus or a writ in the nature of mandamus or any other appropriate writ, order or direction quashing and setting the impugned Email

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

dated 10.01.2020 and Letter dated 15.01.2020 of respondent-bank to the extent that it informed the petitioners that no further extension will be granted and that the bank will exercise the right to forfeit amount already deposited by the petitioners;

(C) YOUR LORDSHIPS may be pleased to issue a writ of mandamus/certiorari or a writ in the nature of mandamus/certiorari or any other appropriate writ, order or direction quashing and setting aside the order dated 17.12.2019 passed by Hon'ble DRT- 1, Ahmedabad in SA/91/2019 as the same was passed without granting an opportunity of hearing to the petitioners;

(D) During the pendency and final disposal of the present petition, YOUR LORDSHIPS may be pleased to stay the operation, implementation and execution of impugned Email dated 10.01.2020 and Letter dated 15.01.2020 of respondent- bank to the extent that it informed the petitioners that no further extension will be granted and that the bank will exercise the right to forfeit amount already deposited by the petitioners and may further be pleased to restrain the respondent---bank from forfeiting the 25% of Bid Amount paid by the petitioners and may further be pleased to extend the time limit for depositing remaining 75% of the Bid Amount, i.e. Rs.1,99,50,000/-.

(E) Pass any such other and/or further orders that may be thought just and proper, in the facts and circumstances of the present case."

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

20. Similarly, the successful bidder for the property being lease hold land bearing industrial Plot No. D-2/CH/397 situated at Dahej, GIDC Industrial Estate/Area preferred Special Civil Application No. 15831 of 2020 with the following prayers:

"a. To admit and allow this petition;

b. To immediately direct the respondent bank to hand over the peaceful and vacant possession of the property in question i.e. Leasehold land bearing industrial plot no. D-2/CH/397 admeasuring 5200.53 sq. meters plot and or thereabout, in Dahej (GIDC) Industrial Estate/Area, situated at Land bearing Revenue Survey No.249/Part lying and being at Mouje Galenda of Taluka Wagra in the Registration District of Bharuch and Sub District Wagra to the petitioner;

C. OR IN THE ALTERNATIVE, if the respondent bank is not in a position to hand over the vacant and peaceful possession of the property in question, direct the respondent bank to refund the entire bid amount of Rs.1,71,35,000/-as deposited by the petitioner with running interest @ 12% per annum from the date of deposit till realization keeping the right of the petitioner open to purchase the property in question;

d. Pending admission, hearing and final disposal of this petition, direct the respondent bank to refund the entire bid amount of Rs.1,71,35,000/-as deposited by

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

the petitioner with running interest @ 12% per annum from the date of deposit till realization;

e. Pass any such other and/or further orders that may be thought just and proper, in the facts and circumstances of the present case."

21. Thereafter, all the four petitions are being heard simultaneously from time to time.

22. Learned Senior Advocate Mr. Percy Kavina assisted by learned advocate Ms. Nalini Lodha at the outset, under instructions submitted that the respondent-Bank of Baroda shall withdraw the notice issued under section 13(2) of the SARFAESAI Act as the said notice does not contain break up of the principal amount and interest as required to be mentioned as per decision of the Division Bench of this Court in Letters Patent Appeal No. 159 of 2020 with liberty to issue a fresh notice for the recovery of the outstanding dues from the borrower-M/s Sarjay Chemicals Pvt. Ltd and its guarantors and directors in accordance with the provisions of the SARFAESAI Act by initiating de novo proceedings.

23. In view of the above statement made by learned Senior Advocate Mr. Kavina, the

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

controversies raised in all the four petitions are required to be considered in a narrow compass with following issues only:

A. Whether the observations made by the DRAT while dismissing the Appeal No. 90 of 2019 filed by the respondent-Bank with regard to the right of the bank to take physical possession of the factory, land and building of the borrower-company, when the symbolic possession is taken under the provisions of the SARFAESAI Act would be sustainable or not?

B. Whether the earnest money deposit and the further amount deposited by the successful bidders who have preferred Special Civil Application No. 5932 of 2020 and Special Civil Application No. 15831 of 2020 are required to be paid interest on the amount to be refunded to them by the respondent-Bank in view of the withdrawal of the proceedings initiated under the SARFAESAI Act or not?

C. With regard to the status of the property in question which was handed over, there is dispute as to whether forcible possession is taken by the respondent-bank which was subsequently taken away by the

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

borrower company or not?

24. Civil Application No. 1 of 2020 is filed by the respondent in Special Civil Application No. 1352 of 2020 pertains to the action to be initiated against the borrower- company and its directors to restore the physical possession of the factory. However, as the respondent-bank has decided to withdraw the notice under section 13(2) of the SARFAESAI Act, the question of restoration of possession to the Bank of Baroda would not arise at this stage and the possession of the factory shall continue to remain with the borrower company.

25. The DRAT while dismissing the Appeal No. 90 of 2019 filed by the respondent-Bank has held as under:

"8. From the above it is Clear that there is 10 mention as to the nature of possession that was taken on 26.02.2019 it only indicated that Authorized Officer has taken possession of the property which in normal meaning refers to physical possession. But said action is challenged before the Tribunal below u/s 17 of the SARFAESI Act by filing S.A. and in the reply the plea taken was that on 26.02.2019 symbolic possession was taken. The very non-mention of nature of possession that was taken on 26.02.2019 would itself speak about the malafide intention of Authorized Officer of Bank.

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

9. Now the challenge is about the order passed on 07.10.2019 which relates to action taken by Bank on 26.09.2019. From the record it appears Bank approached District Collector, Bharuch, on 06.07.2019 who issued notice to Respondents informing that they should get interim order within 14 days from the date of receipt of this notice from the competent forum of law and produce the same before it, otherwise it would initiate legal process as per Section 14 of the SARFAESI Act. It is not known as to what happened to that application subsequent to completion of 14 days. It has to be presumed that said matter is pending before the District Magistrate, Bharuch because without any order u/s 14 of the SARFAESI Act, the Bank took physical possession on 26.09.2019. When the Bank approached District Magistrate seeking assistance u/s 14 of the Act, the argument of Advocate for Bank that process u/s 13 (4) of the SARFAESI Act started on 25.02.2019 and ended on 26.09.2019 is not at all convincing and cannot be accepted under any stretch of imagination.

10. Advocate for Appellant while referring to judgment of Madras High Court in M/s. Lakshmi Shankar Mills (P) Ltd. & Ors. V/s. Authorized Officer / Chief Manager, Indian Bank & Ors. reported in AIR 2008 Madras 181 submitted that the Tribunal has no power to pass any interim mandatory order referring to restoration of possession and as the impugned order is only a interim order restoring the possession, as per this decision, it is an illegal order and the same is liable to be set aside. On the

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

other hand Advocate for Respondents submitted in para 15 of the very judgment, Madras High Court has observed that there is no specific provision u/s 17 of the SARFAESI Act empowering the Tribunal to pass interim orders and if Section 17 (7) of the SARFAESI Act is read along with Section 19 (12) of the Recovery of Debts Due to Banks and financial Institutions Act, 1993 (hereinafter referred to as the RDDB&FI Act), it would be clear that the Tribunal has also jurisdiction to pass interim order u/s 17 (7) of the SARFAESI Act in appropriate cases. Referring to above observation, Advocate for Respondents submitted the case on hand is appropriate case to exercise powers and Tribunal below rightly exercised them. In the above referred Madras High Court decision, a petition u/s 17 of the SARFAESI Act is filed challenging action u/s 13 (4) and in that application an interim application is filed seeking the very same relief and the DRT granted interim relief while main case was pending for the very same relief and in those circumstances Madras High Court held that DRT has no power to order restoration of possession without passing final order. As rightly pointed by Advocate for Respondents, that decision has no application here. Because when the S.A. was pending and also application u/s 14 of SARFAESI Act was pending before District Magistrate, with the help of a private agency Bank took possession during the absence of borrower. In those circumstances, Tribunal below directed restoration of possession.

11. One of the contentions of Advocate for Appellant is that Noble Kumar case (Supra) is relied on by Tribunal below as

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

if it is statute and a judgment cannot be read as statute. For that proposition he relied on judgment of Hon'ble Supreme Court in Goan Real Estate & Construction Ltd. & Anr. V/s. Union of India through Secretary, Ministry of Environment & Ors. reported in 2010 SCC 388. In the above said judgment observation is made that it is right and should not be read in isolation and out of context. In Noble Kumar case (Supra), the issue raised before the Hon'ble supreme Court was that the Bank cannot bypass Section 13 (4) of he SARFAESI Act and invoke provision of Section 14 of the Act. In other words in that case it was contended only after invoking Section 13 (4) of the Act the Authorized Officer has to resort to Section 14 of the Act and clarifying this Hon'ble Supreme Court has formulated three methods for the secured creditor to take possession of the secured assets which are as follows:

(i) The first method would be where the secured creditor gives the requisite notice under rule 8(1) and where he does not meet with any resistance. In that case, the authorised officer will proceed to take steps as stipulated under rule 8(2) onwards to take possession and thereafter for sale of the secured assets to realise the amounts that are claimed by the secured creditor.

(ii) The second situation will arise where the secured creditor meets with resistance from the borrower after the notice under rule 8(1) is given. In that case he will take recourse to the mechanism provided under section 14 of the Act viz.

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

making application to the Magistrate. The Magistrate will scrutinize the application as provided in section 14, and then if satisfied, appoint an officer subordinate to him as provided under section 14 (1)(A) to take possession of the assets and document. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.

(iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly under section 14 of the Act. The Magistrate will thereafter scrutinize the application as provided in section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forwards them to the secured creditor as under clause (ii) above.

12. So, the provision u/s 13 (4) and 14 of the Act are comprehensively examined and the methods to be followed by secured creditor are enumerated in the above referred Noble Kumar's case. As per Article 141 of the Constitution, this decision is binding and the Tribunal below rightly followed it and the objection of Bank on this aspect is not at all tenable.

13. Some decisions are cited to show that simply because S.A. is filed the bank is not prevented from taking further steps. There cannot be any second opinion about this principle because unless there is

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

specific stay the Bank need not stop its further action. But the crucial point is what is further action. Section 13 (4) of Act contemplates only one step of taking possession. So it is for the secured creditor to make up its mind at the time of initiating this measure whether it can be satisfied with symbolic possession or whether it require physical possession to proceed further of selling property. Only after making up its mind it should proceed further. Here from the notice dated 26.02.2019 the secured creditor contemplated of taking possession but evidently it has not succeeded in taking physical possession. When that is the situation, having availed the measure u/s 13 (4) of the Act, it cannot again take the very same measure for a different purpose viz. physical possession particularly when that action was challenged and the matter was pending. In my view, minimum expected from the Bank is to seek permission of the Tribunal below to go for the very same Step. Here in this case when the Bank already approached District Magistrate u/s 13 of the Act seeking assistance without recoursing to it, taking assistance of private agency, in my view, is completely malafide action. Admittedly, no remedy is provided under the statute to take assistance of private agency. But for the reasons best known, the Authorized Officer opted for private agency services ignoring the fact that it already approached District Magistrate for assistance u/s 14 of the Act. If the Bank has proceeded further of issuing Sale Notice and putting the property for sale in pursuance of symbolic possession taken on 25.02.2019 pending of S.A. would not come in the way. But what the Bank did was same measure was again taken

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

by interpreting it as further course of action which cannot be accepted. So under these circumstances, the Tribunal below was perfectly right in ordering for restoration of possession as the action of the Authorized Officer is arbitrary and illegal. Appellant Bank, in spite of correcting its malafied action, vehemently supported such arbitrary and illegal action through this Appeal.

14. For these reasons, I do not find any wrong in the order of the Tribunal below, therefore, Appeal is liable to be dismissed. Accordingly Appeal is dismissed with costs.

15, All Miscellaneous Applications, if any, are dismissed as infructuous."

26. The DRAT while rejecting the appeal of the respondent-Bank in para 13 of the aforesaid order has observed that once the symbolic possession is taken and the bank is satisfied with such symbolic possession, then it would not require physical possession to proceed further of selling the property. The Appellate Tribunal by interpreting the provision of section 13(4) of the SARFAESAI Act is of the opinion that the secured creditor i.e. bank cannot again take the very same measure for different purpose i.e. physical possession particularly when that action was challenged and the matter was pending before the DRT under section 17 of

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

the SARFAESAI Act. It was therefore held by the Appellate Tribunal that no remedy is provided under the statute to take assistance of private agency and the bank, in the facts of the case, could not have taken the physical possession with the help of the private agency without recourse to the section 14 of the SARFAESAI Act and during the pendency of the Securitization Application filed under section 17 of the SARFAESAI Act, the Bank could not have proceeded further with issuing sale notice and putting the property for sale in pursuance of the symbolic possession and again taking the forcible physical possession.

27. The aforesaid findings of the Tribunal is based upon the interpretation of section 13(4) of the SARFAESAI Act and therefore, it would be germane to refer the provision of section 13(4) of the SARFAESAI Act which reads as under:

"13. Enforcement of security interest.

(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:--

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

(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 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.

28. Section 13(4) of the SARFAESAI Act provides that in case of failure of the borrower to discharge the liabilities in full within the period specified in sub-section

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

(2) secured creditor can take recourse to one or more measures specified in clause (a) and clause (b) of the sub-section (4) of section 13 to recover the secured debt i.e. either by taking the possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets or by taking over the management of the business of the borrower with consequential rights. The secured creditor can also appoint any person as manager to manage the secured assets as per clause (c) and further clause (d) also provide for right of the secured creditor to direct any person to pay to the secured creditor so much of the money as is sufficient to pay the secured debts and such person as required any of the secured assets from the borrower and from whom the money is due or may become due to the borrower which is equivalent to garnish his rights.

29. On analysis of the sub-section (4) of section 13 primarily the secured creditor is required to take possession of the secured assets and/or either for sale or for management of the same. Therefore, when the possession notice is issued as per Rule 8 (1) of the Security Interest (Enforcement) Rules,

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

2002 (hereinafter to be referred to as the 'Rules,2002') it may not happen that the borrower may give the physical possession to the secured creditor on service of the notice in Appendix-IV as per the Rule 8(1) of the Rules 2002. In such circumstances, service of notice in Appendix-IV of Rule 8(1) of the Rules, 2002 would amount to taking a symbolic possession by the secured creditor and subsequently when the secured creditor fails to take physical possession from the borrower, assistance as provided under section 14 would enable the secured creditor to take physical possession.

30. In the above context, it would be relevant to refer to Rule 8 of Rules, 2002 which reads as under:

"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 newspapers, one in vernacular language having sufficient

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

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 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.

(4) The authorised officer shall take steps for preservation and protection of secured assets and insure them, if necessary, till they are sold or otherwise disposed of.

(5) Before effecting sale of the immovable property referred to in sub- rule (1) of rule 9, the authorised officer shall obtain valuation of the property from an approved valuer and in consultation with the secured creditor, fix the reserve price of the property and may sell the whole or any part of such immovable secured asset by any of the following methods:--

(a) by obtaining quotations from the persons dealing with similar secured assets or otherwise interested in buying the such assets; or

(b) by inviting tenders from the public;

(c) by holding public auction; or

(d) by private treaty.

(6) The authorised officer shall serve to the borrower a notice of thirty days for sale of the immovable secured

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

assets, under sub-rule (5): Provided that if the sale of such secured asset is being effected by either inviting tenders from the public or by holding public auction, the secured creditor shall cause a public notice in two leading newspapers one in vernacular language having sufficient circulation in the locality by setting out the terms of sale, which shall include,--

(a) The description of the immovable property to be sold, including the details of the encumbrances known to the secured creditor;

(b) the secured debt for recovery of which the property is to be sold;

(c) reserve price, below which the property may not be sold;

(d) time and place of public auction or the time after which sale by any other mode shall be completed;

(e) depositing earnest money as may be stipulated by the secured creditor;

(f) any other thing which the authorised officer considers it material for a purchaser to know in order to judge the nature and value of the property.

(7) Every notice of sale shall be affixed on a conspicuous part of the immovable property and may, if the authorised officer deems if fit, put on the web-site of the secured creditor on the Internet.

(8) Sale by any method other than public auction or public tender, shall be on such terms as may be settled between the parties in writing."

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

31. Sub-rule (3) of Rule 8 of Rules, 2002 provides that in the event of possession of immovable property is actually taken by the authorized officer, such property shall be kept in his own custody. Rule 8 is invoked when the property which is required to be sold after taking possession as per clause

(a) of sub-section (4) of section 13. In such circumstances, the analogy given by the Appellate Tribunal on interpretation of section 13(4) of the SARFAESAI Act that secured creditor is required to make up its mind at the time of initiating the measure whether it can be satisfied with symbolic possession or whether it requires physical possession to proceed further by selling property is without any basis because what is important for secured creditor is to acquire the possession of the secured asset so as to recover the secured debt. On service of the notice under Rule 8 of Rules, 2002, the possession would be transferred to the secured creditor whether the secured creditor is able to take actual possession or not and therefore, it amounts to taking over a symbolic possession which would result in physical possession later on when the secured creditor forcefully takes actual possession

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

with the assistance of the State machinery as provided under section 14 of the SARFAESAI Act. Therefore there is no question of making up mind by the secured creditor at the time of initiating the measure under section 13(4) or satisfaction on the part of the secured creditor to be satisfied with symbolic possession or physical possession to proceed further for selling the property.

32. It is true that the secured creditor cannot take assistance of private agency when the statute provides for assistance of the State machinery to take physical possession by the secured creditor as per section 14 of the SARFAESAI Act.

33. Therefore, I am of the opinion that the observations made by the DRAT while rejecting the appeal of the respondent-Bank do not commensurate with the provisions of the SARFAESAI Act and the Rules, 2002 and therefore, the same are not approved by this Court.

34. It is therefore held that the secured creditor, after service of notice under Rule 8 of the Rules,2002, is entitled to take symbolic possession of the secured assets so

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

as to sale such assets after following the due procedure as per Rule 8 of the Rules 2002 read with section 13(4)(a) of the SARFAESAI Act. It is for the secured creditor to take actual physical possession of the property to sale the same as vacant property so as to get more price for the secured asset with assistance of State machinery as provided under section 14 of the SARFAESAI Act. Therefore, there is no distinction between symbolic possession and physical possession as sought to be drawn by the Appellate Tribunal. The SARFAESAI Act and the Rules, 2002 stipulate only about the possession of the secured assets to be taken by the secured creditor and therefore once the procedure as laid down in Rule 8 of the Rules, 2002 is followed, the secured creditor for all intent and purpose is said to have taken the possession of the property i.e. secured assets. In such circumstances, the secured creditor would take actual possession of the property as provided in sub-rule (3) of Rule 8 of the Rules, 2002 by availing the assistance under section 14 of SARFAESAI Act.

35. I am therefore of the opinion that, the action taken by the secured creditor during the pendency of the Securitization

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

Application when there is no stay granted by the DRT against taking over physical possession and/or sale of the property i.e. secured asset cannot be said to be illegal as such action by the secured creditor would always be subject to outcome of the pending proceedings before the Tribunal under section 17 of the SARFAESAI Act and the secured creditor is always entitled to take steps for recovery of the secured debt under the provisions of the SARFAESAI Act and Rules, 2002 subject to the safeguards provided therein.

36. With regard to Special Civil Application No. 5932 of 2020 and 15831 of 2020 are concerned petitioners of both the petitions are the successful bidders in the auction which was held by BOB during the pendency of the securitization application which is now to be disposed of in view of the withdrawal of the proceedings initiated by the respondent-Bank under section 13(2) of the SARFAESAI Act. In such circumstances, the bank is required to refund the amount deposited by the successful bidder. Therefore, the question arise as to whether any interest is required to be paid on the amount which is deposited by the successful

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

bidder with the bank or not?

37. Learned Senior Advocate Mr. Kavina has relied upon the statement Accounts filed along with the further affidavit filed on behalf of respondent-Bank in Special Civil Application No. 15831 of 2020 to submit that the amount deposited by the successful bidders was kept in a 'No-Lien' account and no interest is accrued thereon and such amount is generally appropriated at the time of issuance of sale certificate. It was therefore, submitted that as the respondent- Bank has not earned any interest on the amount deposited by the successful bidders and kept in 'No-Lien' account, no interest can be awarded by this Court on refund of such amount deposited with the respondent- bank.

38. On the other hand, learned advocate Mr. Majmudar appearing in Special Civil Application No. 5932 of 2020 and learned advocate Mr. Munshi appearing in Special Civil Application No. 15831 of 2020 for the petitioners who are successful bidders submitted that for no fault on part of the petitioners, the amount deposited by the petitioners was blocked on depositing the

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

same with the respondent-bank and the petitioners have also lost the appreciation in the value of the property which would arise if the sale would have been confirmed in their favour being the successful bidders.

39. It was also submitted that the petitioners of both the petitions are victim of the disputes between the bank and the borrower and they have no concern with regard to the litigation which was carried out before the DRT or DRAT or before this Court and for no fault on their part, the substantial amount deposited by the successful bidders was not available for them to utilize for almost last two years.

40. With regard to the statement of account placed on record along with further affidavit, it was submitted that the petitioners, who are successful bidders have no control over affairs of the bank as to in which account the bank would keep such amount and therefore, the petitioners cannot and should not be deprived of the legitimate interest upon the amount which is deposited pursuant to the auction held by the respondent-bank.

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

41. Learned advocate Mr. Majmudar has relied upon the decisions of Culcutta High Court in case of State Bank of India & ors vs. K.D.Fabrics Private Limited and anr decided on 21.12.2017 in Writ Petition No. 660 of 2017 to submit that in that case, 12% interest per annum was awarded to the successful bidder from whom the bank received the amount which the bank was directed to refund. It was therefore submitted that this Court also may grant 12% interest per annum to the auction purchaser while directing the respondent-Bank to refund the amount deposited by them with the bank.

42. It is true that the auction purchaser has deposited the amount pursuant to the auction held by the bank. The auction purchasers have also not been able to use such amount for almost two years and accordingly, there is an opportunity cost incurred by the auction purchaser resulting into loss for not being able to use such amount which is deposited with the respondent-bank which has not resulted into sale of the property in view of the withdrawal of the proceedings initiated by the respondent-bank for recovery of its dues

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

under the SARFAESAI Act. The auction purchaser has deposited the amount in good faith and more particularly, pursuant to the order passed by this Court in Special Civil Application No. 22597 of 2019 on 18.12.2019.

43. The petitioner of Special Civil Application No. 15831 of 2020 has deposited the entire consideration for the property auctioned pursuant to the notice issued by the bank to deposit the entire amount failing which, it was told to the auction purchaser that the sale would fail.

44. In such circumstances, considering the prevailing rate of interest at which the bank provides the financial assistance, I am of the opinion that it would be just and proper to direct the respondent bank to refund the amount deposited by the auction purchaser with simple interest @ 9% from the date of deposit till the date of refund.

45. In view of the above, all the four petitions are disposed of with following directions:

1. In view of statement made on behalf of the respondent-Bank to withdraw the

C/SCA/1352/2020 JUDGMENT DATED: 22/10/2021

proceedings initiated under the SARFAESAI Act, the respondent-Bank is permitted to initiate fresh proceedings for recovery of the outstanding dues of the borrower, directors and guarantors under the provisions of the SARFAESAI Act, 2002 after following the due prodecure in accordance with law and as a consequence, Securitization Application No. 91 of 2019 pending before the DRT shall also stand disposed of.

2. Respondent-Bank is directed to refund the amount deposited by the auction purchasers and the petitioners of Special Civil Application No. 5932 of 2020 and Special Civil Application No. 15831 of 2020 with 9% simple interest per annum from the date of deposit till the date of payment within a period of four weeks from today.

46. All the four petitions and Civil Application are accordingly disposed of with the aforesaid directions. Notice is discharged.

(BHARGAV D. KARIA, J) JYOTI V. JANI