Karnataka High Court
M/S International Asset ... vs Ms Jhansirani Vinodkumar on 5 June, 2024
Author: Chief Justice
Bench: Chief Justice
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 5TH DAY OF JUNE, 2024
PRESENT
THE HON'BLE MR. N.V. ANJARIA, CHIEF JUSTICE
AND
THE HON'BLE MR. JUSTICE T.G. SHIVASHANKARE GOWDA
WRIT APPEAL NO. 231 OF 2024 (GM-RES) C/W
WRIT APPEAL NO. 230 OF 2024 (GM-RES)
IN W.A. NO. 231 OF 2024
BETWEEN:
1. M/S. INTERNATIONAL ASSET RECONSTRUCTION
COMPANY LIMITED
HAVING ITS BRANCH OFFICE AT:
# A-601/602/605, 6TH FLOOR,
215 ATRIUM, KANAKIA SPACES
ANDHERI KURLA ROAD,
ANDHERI (EAST), MUMBAI - 400 093
REPT. BY ITS SENIOR VICE PRESIDENT,
MR. SIDHHARTH SHAH.
... APPELLANT
(BY SRI P.S. RAJAGOPAL, SENIOR ADVOCATE FOR
SMT. SREEDEVI K.B. & SRI PATIL J.M., ADVOCATES)
AND:
1. MS. JHANSIRANI VINODKUMAR
W/O LATE VINODKUMAR,
AGED ABOUT 43 YEARS,
R/A NO. 59/4, 2ND BLOCK,
DODDABOMMASANDRA,
VIDYARANYAPURA,
BENGALURU - 560 072.
2. SRI VIJAY KUMAR M D
S/O SRI MALLAN GOWDA,
AGED ABOUT 38 YEARS
R/AT KHB COLONY,
-2-
KUSHTAGI ROAD,
SINDHANURU - 584 128.
3. SRI N.G. DEEPAK
S/O LATE N.K. GUNDU ROAD,
AGED ABOUT 45 YEARS,
R/AT # 34, SRI ANANTHAKRUPA,
GM COTTAGES, DODDABIDARAKALLU,
NAGASANDRA POST,
BENGALURU - 560 073.
4. SRI DINESH NAYAK N
S/O SRI RAMAKRISHNA NAYAK,
AGED ABOUT 51 YEARS,
R/AT # 60, VASTHA KUTEERA,
III PHASE, BLUEJAY,
KARIHOBANAHALLI, NAGASANDRA POST,
BENGALURU - 560 073.
5. SRI SATISH KUMAR MITTAL
S/O SRI CHET RAM MITTAL,
AGED ABOUT 50 YEARS
R/A # 403, 4TH FLOOR,
BINDU AMULYA, ANJANA NAGAR,
MAGADI MAIN ROAD,
BENGALURU - 560 091.
6. SRI VEDPRAKASH MITTAL
S/O SRI CHET RAM MITTAL
AGED ABOUT 48 YEARS
R/AT #404, 4TH FLOOR,
BINDU AMULYA, ANJANA NAGAR,
MAGADI MAIN ROAD,
BENGALURU - 560 091.
7. SRI T DIVAKARA REDDY
S/O THIMME REDDY
AGED ABOUT 58 YEARS
R/AT # 712, 3RD MAIN ROAD
NEAR GANESH TEMPLE
HMT LAYOUT, NAGASANDRA
BENGALURU - 560 073.
8. M/S MAROTIA STEEL ENGINEERING PVT. LTD.,
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT
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HAVING ITS REGISTRED OFFICE AT:
# 49-A, II PHASE, OPP. ARAVIND MOTORS
PEENYA INDUSTRIAL AREA
BENGALURU - 560 058
REPRESENTED BY ITS DIRECTOR
AND AUTHORISED SIGNATORY
SAKET KUMAR BHARPILANIA.
9. SRI B.S. RAMEGOWDA
S/O SONNEGOWDA,
AGED ABOUT 55 YEARS,
R/A #9, 5TH A CROSS,
HANUMANTHEGOWDA ROAD,
SAPTHAGIRI LAYOUT,
NEAR SAPTAGIRI ENGINEERING COLLEGE,
CHIKKASANDRA,
BENGALURU - 560 057.
10 . SRI K.N. VISWANADHAN NAIR
S/O SRI K.K. NARAYANA NAIR,
AGED ABOUT 77 YEARS,
R/A #26/1, VENKATESHWARA NILAYA
5TH CROSS, VIDYARANAYAPURA MAIN ROAD,
DODDABHOMMASANDRA,
BENGALURU - 560 097.
11 . SRI C. VEERA REDDY
S/O SRI KRISHNA REDDY,
AGED ABOUT 38 YEARS,
R/A #1001/C, 1ST MAIN ROAD,
NEAR SBI BANK, NAGASANDRA POST,
BENGALURU - 560 073.
12 . SRI SUNIL GANESH
S/O M GANESH,
AGED ABOUT 53 YEARS,
R/A #7-35/23, UJJODI,
NEAR SHARADA SERVICE
STATION, KANKANADI,
MANGALURU - 574 199
REPRESENTED BY ITS GPA HOLDER
SRI GURUPRASAD S.P.
S/O SUDHAKARA PUTTUR
13 . SRI CHANDRASHEKHAR J
S/O SRI K JAYAPAL,
-4-
AGED ABOUT 41 YEARS,
R/A FLAT NO. TF2, 3RD FLOOR,
#45, VENSAPALA ENCLAVE
SHREE RAMANJANEYA NAGAR,
CHIKKALSANDRA
BENGALURU - 560 061.
14 . M/S ELECTREX (INDIA) LIMITED
NO. 21-D1, PEENYA INDUSTRIAL AREA,
2ND PHASE, BENGALURU - 560 058.
REPT. BY ITS MANAGING DIRECTOR,
MR. MUKESH CHOKSI.
(V/O. DATED 06/03/2024 R-14 DELETED)
. . . RESPONDENTS
(SRI UDAYA HOLLA, SENIOR ADVOCATE FOR
SRI RAKESH B. BHATT, ADVOCATE FOR
RESPONDENTS 1 TO 13)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO ALLOW THE WRIT
APPEAL AND SET ASIDE THE IMPUGNED JUDGMENT DATED
06.02.2024 PASSED IN WP No. 26720/2023 PASSED BY THE
LEARNED SINGLE JUDGE IN THE INTEREST OF JUSTICE AND
EQUITY.
IN W.A. NO. 230 OF 2024
BETWEEN :
1. M/S. INTERNATIONAL ASSET RECONSTRUCTION
COMPANY LIMITED
HAVING ITS BRANCH OFFICE AT:
# A-601/602/605, 6TH FLOOR
215 ATRIUM, KANAKIA SPACES
ANDHERI KURLA ROAD
ANDHERI (EAST), MUMBAI - 400 093
REPT. BY ITS SENIOR VICE PRESIDENT
MR SIDHHARTH SHAH.
...APPELLANT
(BY SRI P.S. RAJAGOPAL, SENIOR ADVOCATE FOR
SMT. SREEDEVI K.B. & SRI PATIL J.M., ADVOCATES)
AND :
1. M/S. MARUTHI TECHNOLOGIES
A PARTNERSHIP FIRM
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UNDER THE INDIAN PARTNERSHIP ACT
HAVING ITS OFFICE AT:
#292, 5TH MAIN, 3RD CROSS
RAJAGOPALANAGARA
PEENYA II STAGE, BENGALURU-560058
REP. BY ITS PARTNER SRI MALLAPPA
@ MALLAPPA DEVAL
S/O MR. DYAMANNA DEVAL
AGED ABOUT 42 YEARS.
2. SRI ABHILASH C.J.
S/O SRI JAGANNATH C.Y.
AGED ABOUT 36 YEARS
R/A #6, CHIKKABILATHI
VADDARAHALLI POST
SHRAVANABELAGOLA HOBLI
CHANNARAYAPATTANA TALUK
HASSAN - 573 116.
3. M/S SREEPAL GREEN FUTURES PVT. LTD.
A COMPANY INCORPORARTED UNDER
THE COMPANIES ACT,
HAVING ITS OFFICE AT;
H.O. UNIT NO.1102
ORIANA BUSINESS PARK
OPP. C.G.S.T. BHAVAN
ROAD NO.22, MIDC, WAGLE ESTATE
THANE WEST - 400 604
REP. BY ITS DIRECTOR
SRI JAYANT MUJUMDAR.
4. M/S SUMEDHA LASER TECHNOLOGIES PVT LTD
A COMPANY INCORPORATED UNDER
THE COMPANY ACT
HAVING ITS OFFICE AT;
I PARK, FLAT NO.3B/415/8,
1ST FLOOR, KIADB MAIN ROAD,
I STAGE, II PHASE, PEENYA INDUSTRIAL AREA
BENGALURU - 560 058
REP. BY ITS MANAGING DIRECTOR
SRI K. ASHOK KUMAR.
5. M/S JAY MINING AND WATERWELL SOLUTIONS
A PARTNERSHIP FIRM
UNDER THE INDIAN PARTNERSHIP ACT
HAVING ITS OFFICE AT
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#79, 5TH MAIN, MALAGALA,
NAGARABHAVI II STAGE
BENGALURU - 560 072
REP. BY ITS MANAGING PARTNER
SRI J. CHANDRASHEKHAR
S/O SRI K. JAYAPAL.
6. M/S SHANTHA N
D/O SRI NARAYANA D
AGED ABOUT 55 YEARS
R/A #37, 4TH 'A' MAIN, 5TH CROSS
TEACHERS COLONY
SHANKARNAGAR
VTC BENGALURU NORTH
NANDINI LAYOUT
BENGALURU - 560 096.
7. M/S. PUSHPA N
D/O SRI NARAYANA D
AGED ABOUT 55 YEARS
R/A # 37, 4TH 'A' MAIN
5TH CROSS, TEACHERS COLONY
SHANKARNAGAR,
VTC BENGALURU NORTH
NANDINI LAYOUT
BENGALURU - 560 096.
8. SRI VIJAY KUMAR MOHANANI
S/O LATE DAYAL DAS MOHANANI
AGED ABOUT 50 YEARS
R/A #D-1302, MANTRI GREENS
NO.1, SAMPIGE ROAD
MALLESHWARAM
BENGALURU - 560 003.
9. SRI D.R. SRINIVASA
S/O LATE RAMACHANDRAIAH
AGED ABOUT 68 YEARS
10 . SMT. VASUNDHARA
W/O SRI D.R. SRINIVASA
AGED ABOUT 63 YEARS
11 . SRI MURALI S
S/O SRI D.R. SRINIVASA
AGED ABOUT 36 YEARS
-7-
RESPONDENT Nos.9 TO 11 ARE
R/A 442, 15TH MAIN
3RD STAGE, I BLOCK
BASAVESHWARANAGAR
BENGALURU - 560 079.
12 . SRI SYED SHAHUL HAMEED
S/O SRI SYED SARDAR
AGED ABOUT 38 YEARS
R/A #18/24, 9TH 'B' MAIN
BTM I STAGE, BENGALURU SOUTH
BENGALURU DHARMARAM COLLEGE
BENGALURU - 560 029.
13 . MS. DIVYA PRIYA S.V.
D/O SRI R. SHANKAR VEERAPPA
AGED ABOUT 27 YEARS
R/A. #1619, LAKSHMI NILAYA
ABBIGERE MAIN ROAD
K.G. HALLI,
BENGALURU - 560 015.
14 . M/S ELECTREX (INDIA) LIMITED
NO.21-D1, PEENYA INDUSTRIAL AREA
2ND PHASE, BENGALURU - 560 058
REPT. BY ITS MANAGING DIRECTOR
MR MUKESH CHOKSI.
(V/O. DATED 06/03/2024 R-14 DELETED)
... RESPONDENTS
(SRI K.N. PHANINDRA, SENIOR ADVOCATE FOR
SRI SRIKANTH PATIL K., ADVOCATE FOR
RESPONDENTS 1 TO 13)
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT, PRAYING TO ALLOW THE WRIT
APPEAL AND SET ASIDE THE IMPUGNED JUDGEMENT DATED
06/02/2024 PASSED IN WP NO.26996/2023 PASSED BY THE
LEARNED SINGLE JUDGE & ETC.
THESE APPEALS, HAVING HEARD AND RESERVED FOR
JUDGMENT, COMING ON FOR PRONOUNCEMENT OF JUDGMENT,
THIS DAY, CHIEF JUSTICE DELIVERED THE FOLLOWING:
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JUDGMENT
These two appeals arise out of common judgment and order
dated 06.02.2024 passed by learned Single Judge in Writ Petition
No.26720 of 2023 and Writ Petition No.26996 of 2023. The first
mentioned petition is referable to Writ Appeal No.231 of 2024,
whereas, the Writ Appeal No.230 of 2024 arises out of Writ Petition
No.26996 of 2023.
1.1 Since in both the petitions facts are common and learned
Single Judge also dealt with both the petitions together, these two
appeals are considered simultaneously to be disposed of by this
judgment and order.
1.2 Heard learned Senior Advocate Mr. P.S. Rajagopal with
learned Advocate Smt. K. B. Sreedevi and learned Advocate
Mr.J.M. Patil for the appellant in both the appeals, learned Senior
Advocate Mr.Udaya Holla assisted by learned Advocate
Mr.Rakesh B. Bhatt for respondent Nos.1 to 13 in Writ Appeal
No.231 of 2024 and learned Senior Advocate Mr.K.N.Phanindra
assisted by learned advocate Mr.Srikanth Patil K for respondent Nos.1
to 13 in Writ Appeal No.230 of 2024. Respondent No.14 in both the
appeals came to be deleted from the array of respondents, as per
the order of the Court.
2. The appeals are preferred by the appellant-M/s.
International Asset Reconstruction Company Ltd.-original
respondent No.1 under Section 4 of the Karnataka High Court Act,
1961, seeking to call in question the common judgment and order
of learned Single Judge. The writ petitions which were filed by
respondent Nos.1 to 13 herein, came to be allowed in terms of the
directions issued by learned Single Judge.
2.1 The following operative directions were passed,
"(i) Writ Petitions are allowed in part.
(ii) The orders dated 26-03-2022, 06-07-2023 and
21.07.2023 passed by the XXXI Additional Chief
Metropolitan Magistrate, Bengaluru in Criminal
Miscellaneous No.5700 of 2021 are set aside,
insofar as they concern granting of possession of
one hectare and 2012 sq.mts. in Sy.No.34 of plot
No.21-D, Peenya Industrial Area, Nallakadaranahalli,
Yeshwantapur Hobli, Bangalore North Taluk and is
restricted to 2012 sq.mts. in terms of the Assignment
Deed 04-02-2008.
(iii) The 1st respondent/Company is at liberty to act
in accordance with law, to take possession of one
hectare as well, bearing in mind the observations
made in the course of the order.
(iv) All other contentions of both parties remain
open."
2.2 The orders dated 26.03.2022, 06.07.2023 and 21.07.2023
under challenge in the writ petitions were the orders passed by
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learned 31st Additional Chief Metropolitan Magistrate, Bengaluru, in
Criminal Misc. Application No.5700 of 2021, in exercise of powers
under Section 14 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(hereinafter referred to as 'SARFAESI Act').
2.3 The impugned orders were set aside in so far as they related
to handing over possession of the land admeasuring 1 hectare and
2012 sq.mts., in Plot No.21-D, Survey No.34, Peenya Industrial
Area, Nallakadaranahalli, Yeshwanthapur Hobli, Bengaluru North
Taluk, and the taking over possession was restricted to 2012
sq.mts., out of the said total land, in terms of the Assignment Deed
dated 04.02.2008. Liberty was reserved for the appellant-
respondent No.1 to act in accordance with law to take possession
of the rest of 1 hectare in light of the observations made in the
order.
3. The petitioners were neither the borrowers nor the
guarantors. While challenging the aforementioned orders passed
by learned Additional Chief Metropolitan Magistrate under Section
14 of the SARFAESI Act, it was the case of the original petitioners
inter alia that they were the absolute owners and in possession of
immovable plots forming part of the Eastern plot bearing No.21-D
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in the Peenya II Phase Industrial Area in Survey No.34, Bengaluru
North Taluk. The petitioners stated that different petitioners owned
different plots carved out from the main plot which was purchased
by them from respondent - M/s. Electrex (India) Ltd. and from one
M/s. Bindu Properties for valuable consideration.
3.1 It was stated that several of the petitioners had obtained
loan from Bruhat Bengaluru Mahanagara Palike and had also
constructed industrial units. The property originally belonged to
Karnataka Industrial Area Development Board (KIADB).
Subsequently, respondent No.2 had in its favour the Sale Deed in
respect of the said property from KIADB. The said M/s.Electrex
(India) Ltd., took financial assistance from the original lender-M/s.
IFCI Ltd., in the nature of equipment credit for the purchase of
machines for its existing factory at the industrial area to the tune of
Rs.200 lakhs, for which Equipment Credit Agreement dated
25.03.1994 came to be executed between the parties. Additional
financial assistance was subsequently sanctioned by the lender.
In respect of the loan obtained by the said M/s. Electrex (India)
Ltd., Memorandum of Entry mortgaging the property dated
20.11.1996 was executed.
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3.2 Respondent No.2 defaulted in making the payment of loan.
M/s. IFCI Ltd., started recovery proceedings by filing Original
Application No. 61 of 2000 before the Debts Recovery Tribunal,
Bengaluru. The application was allowed by the Tribunal by order
dated 05.12.2006. Subsequently, a Recovery Certificate in the
said proceedings was issued on 05.12.2006 for a sum of
Rs.45,63,67,694/-. In the application filed before the Debts
Recovery Tribunal as well as the Recovery Certificate, what was
mentioned in Plot No.21-D in Survey No.34 to the extent of 2012
sq.mts.
3.3 M/s. IFCI Ltd., as a original lender, who had obtained the
Recovery Certificate from the Debts Recovery Tribunal, transferred
and assigned the credit facility, the right to recover the dues in
respect of the financial assistance extended by it, in favour of
M/s.International Asset Reconstruction Company Ltd.-the
appellant herein by executing Assignment Deed dated 04.02.2008.
The appellant-assignee stepped into the shoe of the original lender
acquiring right to recover the debt for and on behalf of original
lender.
3.4 It is on the basis of the above Assignment Deed dated
04.02.2008 that the appellant claims to have acquired the rights of
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the original lender. The petitioners stated that Schedule-B of the
said Assignment Deed mentioned that what was assigned was the
immovable property admeasuring 2012 sq.mts., bearing Plot
No.21-D in Survey No.34.
3.5 Deriving the entitlement to take legal action from the said
Deed of Assignment, the appellant herein invoked the provisions of
SARFAESI Act to issue notice under Section 13(2) of the Act dated
22.02.2013. It was the case of the petitioners inter alia that the
said demand notice did not refer about acquisition of rights or
interest in the financial assets by the appellant as per the Deed of
Assignment dated 04.02.2008. It is the contention of the
petitioners that said demand notice under Section 13(2) itself was
invalid in the eye of law inasmuch as it not only did not disclose
about Deed of Assignment, but wrongly mentioned the description
and measurement of the property to show it to be of the area of 1
hectare and 2012 sq.mts., seeking to enforce the security interest
in relation to the said entire area. It appears that, subsequently the
appellant issued Possession Notice under Section 13(4) of the
SARFAESI Act in respect of said Survey No.34 claiming
possession of entire area of 1 hectare and 2012 sq.mts.
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3.6 The original respondent No.2-M/s. Electrex (India) Ltd.,
passed the resolution dated 28.08.2017 to authorise the sale of
Western portion of the property and then a registered Agreement
of Sale dated 19.06.2018 came to be executed by respondent
No.2 in favour of one M/s. Bindu Properties. Respondent No.2
thereafter bifurcated 1 hectare of land into different plots and sold
out the plots of different measurements to different persons. The
petitioners claim that they are the bonafide purchasers for valuable
consideration and having purchased the same from M/s. Bindu
Properties, put up industrial units and established industries. It
was stated that for all these long years, nobody came to the spot
and never issued notice to assert their claim in respect of the land
area.
3.7 It was only in the year 2021 that an application under
Section 14 of the SARFAESI Act came to be filed by respondent
No.1-Appellant Asset Reconstruction Company which culminated
into the impugned orders, whereby, the Additional Chief
Metropolitan Magistrate directed handing over possession of the
property measuring 1 hectare and 2012 sq.mts. In the backdrop
were the order passed by the Debt Recovery Tribunal and the
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Recovery Certificate issued in the proceedings by M/s. IFCI-the
lender, to recover the debt.
3.8 The total case of the petitioners was and has been that
respondent No.2-M/s. Electrex (India) Ltd., availed the credit
facilities from original lender-M/s. IFCI Ltd., by executing the
Memorandum of Entry on 20.11.1996 and thereby offering in
mortgage of the schedule property bearing Plot No.21-D in Survey
No.34, mentioned to the extent of 2012 sq.mts., only and that too
the liability of respondent No.2 would be only to the said extent of
2012 sq.mts., out of the total area of the said land admeasuring 1
hectare and 2012 sq.mts.
3.9 The crux question that arises for consideration is whether the
Additional Chief Metropolitan Magistrate exercising powers under
Section 14 of the SARFAESI Act, could have passed orders
requiring to hand over the possession of the total area of 1 hectare
and 2012 sq.mts. of the land.
4. Learned Single Judge considered the controversy to come to
the conclusion that only 2012 sq.mts. of land was mortgaged and
that the land to the said extent was the security corresponded with
the debt assignment. It was thus held that the Additional Chief
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Executive Magistrate was not justified in directing to handover the
possession of total land of 1 hectare and 2012 sq.mts. Learned
Single Judge, therefore, set aside the orders passed by the
Executive Magistrate and restricted the operation of the orders for
taking possession of the land to the extent of area 2012 sq.mts.
4.1 Learned Single Judge has made the following observations
after considering the statutory provisions,
"Therefore, enforcement of security interest as
obtaining under Section 13 of the Act can be at the
hands of an assignee. In the case at hand the Bank,
the assignor and the Company, the assignee and the
agreement between the two for transfer of rights is
the Assignment Deed. The Assignment Deed by the
assignor to the assignee nowhere mentions one
hectare and 2012 sq.mts. It only mentions 2012
sq.mts. It is this act of the respondent/Company that
merited entertainment of the petitions as it was
calling in question an order of the learned Magistrate
which directs taking possession of one hectare and
2012 sq.mts. In the normal circumstances the
petition of the kind would not be entertainable. ..."
5. At this stage, certain provisions of the SARFAESI Act would
be relevant to be referred to. "Asset reconstruction company" is
defined in Section 2(ba) of the Act. The appellant is an asset
reconstruction company within the meaning of the said section. It
is also a secured creditor by virtue of Section 2(zd)(iii). "Financial
asset" means debt or receivables contemplated in Section 2(l)(i) to
- 17 -
(v) which includes a mortgage, charge, hypothecation or pledge.
The word "secured debt" defined in Section 2(ze) to mean a debt
which is secured by any security interest.
5.1 Section 2(zf) is the definition of "security interest". It means
right, title or interest of any kind, other than those specified in
Section 31, upon property created in favour of any secured
creditor. It inter alia includes any mortgage, charge,
hypothecation, assignment of any right, title or interest of any kind,
of tangible asset, retained by the secured creditor as an owner of
the property.
5.2 Section 5 of the Act contemplates "Acquisition of rights or
interest in financial assets". It says that any asset reconstruction
company may acquire financial assets of any bank or financial
institution inter alia by entering into agreement with such bank or
financial institution on such terms and conditions as may be
agreed upon between them. Section 13 in Chapter III of the Act
deals with "Enforcement of security interest".
5.3 The application filed by the appellant Company under
Section 14 of the SARFAESI Act was pursuant to and in light of the
Recovery Certificate issued by the Debt Recovery Tribunal in the
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proceedings of Original Application. It was inter alia stated in
paragraph 10 of the application that the Debts Recovery Tribunal
by order dated 05.12.2006 allowed the Original Application
directing the respondent as well as its directors as well as
guarantors to pay the claim amount. It was stated that, respondent
was liable to pay a sum of Rs.51,07,51,835/- which was the
amount to be secured under the decree of the Tribunal and
covered under the Recovery Certificate issued.
5.4 It was clearly stated in paragraph 18 of the application that
"the respondent had availed the credit facility by mortgaging the
schedule property" and post availing, it committed default and the
land issued is classified as non-performing asset. The schedule
property as described in Schedule-B was to the extent of 2012
sq.mts. in plot No.21-D in Survey No.34. Therefore, the
application itself under Section 14 was clear and was to be
confined to the property admeasuring 2012 sq.mts.
5.5 With the background as above, the following factual aspects
emerge,
(i) The document in the nature of Memorandum of Entry dated
20.11.1996 which figures on record contains the description of the
entire immovable property which was subject matter of mortgage.
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The contents of the above document clearly show that the property
to the extent mentioned in the second schedule was mortgaged.
The second schedule was as under,
"SECOND SCHEDULE
(Description of entire immovable properties)
All that piece and parcel of industrial land
with buildings, structures, fittings and fixtures
thereon bearing Plot No.21-D1, in Sy.No.34,
Industrial Area, Nallakadirenahally,
Yeshwantpur Hobli, Bangalore North Taluk,
Bangalore District totally measuring an extent of
2012 sq.mtrs. and bounded on the :
East by - KIADB Road
West by - Private land
North by - Plot No.20 (20 vide
proposed village and
road)
South by - Plot No.21-D2''
(ii) It was only the 2012 sq.mts. of land which was mortgaged
was put forward before the Debts Recovery Tribunal in the original
application filed by respondent No.2.
(iii) The Recovery Certificate dated 05.12.2006 was issued by
the Tribunal. It mentioned the mortgage of immovable property in
Schedule Property as under,
"All that piece and parcel of industrial land with
buildings, structures, fittings and fixtures thereon
bearing Plot No.21-D1, in Survey No.34, industrial
Area, Nallakadirenahally, Yeshwantpur Hobli,
Bangalore North Taluk, Bangalore District, totally
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measuring an extent of 2012 sq.mts. and bounded
on:"
(iv) The original lender and IFCI who was in possession of the
said Recovery Certificate assigned the credit facility to the
appellant-Asset Reconstruction Company. The assignment could
not have been beyond 2012 sq.mts. which was covered in the
Recovery Certificate.
(v) In the Assignment Deed dated 04.02.2008, the description of
the immovable properties charged in favour of the assignor was
mentioned in Schedule-B as under,
"(1) All that piece & parcel of industrial land with
buildings, structures, fittings and fixtures on Plot
No.21-D1, Sy.No.34, Industrial Area,
Nallakadirehahally, Yeshwantpur Hobli, Bangalore
North Taluk, Bangalore District totally measuring an
extent of 2012 sq.mtrs. and bounded on East by:
KIADB Road, West by: Private land, North by: Plot
No.20, South by: 21-D2.
(2) Exclusive charge in favour of the assignor on 10
Nos. of various machineries mentioned in schedule
enclosed to the Deed of H.P Dated 26-03-1994,
together with equipment installed/to be installed at
factory premises of the company at Peenya,
Bangalore under Equipment credit scheme.
(3) Hypothecation of other machinery on pari-pari
first charge basis."
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5.6 From the above factual aspects emerging from record and
emanating from the relevant documents, it is manifest and clear
that the property charged in favour of the assignor who was
assigned the debt was to the extent of 2012 sq.mts only. In the
process of recovery of debt, assignor who had entered into the
shoe of original debtor, was entitled to take the land to the extent
of 2012 sq.mts. only as security. The enforcement of the security
interest by the assignor was limited to that extent as the property to
that extent only was mortgaged with the original lender.
5.7 When it clearly emerged from the record that the assignment
was in terms of the Assignment Deed dated 04.02.2008 which was
only in respect of 2012 sq.mts. of land, the contention that the
other banks had authorised assignee to take over the total area of
1 hectare also is of no consequence and does not carry the case
of the respondent any further. The birth of the assignee company
was in terms of the Assignment Deed from the original lender. The
rights which could be enforced by the assignee was circumscribed
by the Assignment Deed and the details as well as the terms of the
security interest created and mentioned therein.
5.8 It appears that either by inadvertence or for culpable
reasons, when notice under Section 13(2) of the SARFAESI Act
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came to be issued by the appellant in process of recovery of the
debt, in the description of the immovable property, the entire land
in survey No.34 admeasuring 1 hectare 2012 sq.mts. was
mentioned. It was the clear mismatch with the actual extent of the
land mortgaged as reflected in the Memorandum of 1996. It was
therefore contended by the appellant that the very notice under
Section 13(2) followed by notice under Section 13(4) of the
SARFAESI Act for possession could be said to be without
compliance of the mandatory requirements and was invalid in the
eye of law. The submission could not be brushed aside lightly that
notice issued under Section 13(2) of the SARFAESI Act stood
invalid as it did not comply with the requirements of mentioning the
specific details. The land area mentioned was to 1 hectare and
2012 sq.mts., while it was in actuality only 2012 sq.mts., which was
the extent of land mortgaged in respect of the loan obtained.
5.9 The subject matter dispute having travelled thus far upto the
stage of writ appeal, the contention sought to be raised that the
writ petition was not entertainable as the statutory alternative
remedy under Section 17 of the Act was available, would render
academic. Even otherwise, it is not possible to set the clock back
at this stage. The rights of the parties have been adjudicated.
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Further, it could be submitted that the notice under Section 13(2)
of the Act did not contain the requisite details needed to be
mandatorily mentioned therein and in that view, the issue could be
examined in the writ petition. In any view, at this stage, the
contention about the alternative remedy could not be entertained.
6. In view of aforesaid discussion and the reasons supplied, no
error could be booked in the judgment and order of learned Single
Judge. The same is upheld.
6.1 The assignor steps into the shoe of the original lender and
the covenants between the borrower and original lender binds the
assignor. The "Security interest" sought to be enforced by the
assignee could not travel beyond what was assigned. The
decision of the Debt Recovery Tribunal and Recovery Certificate
was delimited to and was in the context of 2012 sq.mts. land only.
6.2 Section 5 of the SARFAESI Act deals with acquisition of
rights or interest in a financial asset by any asset reconstruction
company. The ambit of assignment cannot be beyond what the
assignor could assign. When the Assignment Deed dated
04.02.2008 mentioned the debt to correspond the mortgage of
2012 sq.mts. of land only, the assignor could not have enforced its
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rights and security interest in respect of the entire land. The
Assignment Deed was the defining document. The assignment
was done to aforementioned extent only.
7. Both the appeals stand meritless and are dismissed.
In view of dismissal of the appeals, the interlocutory
applications would not survive and they stand accordingly
disposed of.
Sd/-
CHIEF JUSTICE
Sd/-
JUDGE
AHB
