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Three methods of possession under Section 13(4)

Explanations/Held:-

a) take possession of the secured assets, the following  conditions
must be satisfied:  (i) That there must be  a  security  agreement  which
creates the liability of the borrower  to  make  repayment  to  the  secured
creditor of the secured debt, (ii)  The  secured  creditor  is  required  to
demand the borrower by notice in writing to  discharge  the  full  liability
within a period of 60 days from the date of the notice.

b) receiver appointed by the Magistrate not required to follow  Rule  8  of
the Security Interest  (Enforcement)  Rules,  2002

c) three methods for the  secured  creditor  to  take
possession of the secured assets:-
      (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. 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
      documents. 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.




                                                                  Reportable


                        IN THE SUPREME COURT OF INDIA


                       CRIMINAL APPELLATE JURISDICTION


                    CRIMINAL APPEAL NO.  1218     OF 2013
     (Arising out of Special Leave Petition (Criminal) No.2038 of 2011)
Standard Chartered Bank                      ...Appellant
            Versus
V. Noble Kumar & Others                      ...Respondents


                                    WITH

                   CRIMINAL APPEAL NO.  1217       OF 2013
     (Arising out of Special Leave Petition (Criminal) No.6560 of 2011)
Senior Manager, State Bank of India
& Another                                       ...Appellants
            Versus
R. Shiva Subramaniyan & Another              ...Respondents




                               J U D G M E N T


Chelameswar, J.

1.    Leave granted.


2.    Since both the appeals raise a common question of law,  the  same  are
being disposed of by this common judgment.  For the sake of convenience,  we
shall refer to the facts in Criminal Appeal arising  out  of  Special  Leave
Petition (Criminal) No.2038 of 2011.

3.    This appeal arises out of judgment and order  of  the  High  Court  of
Judicature at Madras in Writ Petition No.4600 of 2010  dated  23rd  January,
2003.

4.     The  first  respondent  is  a  guarantor  of  the  borrower  to  loan
transaction whereby the second respondent borrowed money from the  appellant
herein.  The undisputed facts  are  that  the  first  respondent  created  a
mortgage on certain property  (Land  and  building  comprised  in  Re-survey
No.493/2 lying within the sub-registration district of Saidapet  hereinafter
referred  to  as  the  "secured  asset")  owned  by  him   to   secure   the
abovementioned loan.[1]

5.    On 15.11.2007, a notice under section 13(2)[2] of  the  Securitisation
and Reconstruction of Financial Assets and Enforcement of Security  Interest
Act, 2002 (hereinafter referred to as  "the  SARFAESI  Act")  demanding  the
repayment of the loan amount along with interest within a  period  of  sixty
days was issued inter  alia  to  the  borrower  as  well  as  the  guarantor
(respondent  nos.2  and  1  herein).   The  said  notice  also  advised  the
respondents to comply with the demand  in  order  to  avoid  further  action
under the Act.  The first respondent neither made  the  payment  nor  raised
any objection to the said demand.

6.    Consequent upon the failure of the respondents to  make  the  payments
the appellant  herein  made  an  application  under  section  14[3]  of  the
SARFAESI Act  in  the  Court  of  Chief  Judicial  Magistrate,  Chengalpattu
requesting him to take possession of the secured asset and to  handover  the
same to the appellant.

7.     Pursuant  to  the  abovementioned  application,  the  Chief  Judicial
Magistrate, Chengalpattu by his proceeding  dated  14.12.2009  appointed  an
Advocate commissioner to  take  possession  of  the  secured  asset  and  to
handover the same to the appellant herein.

8.    Challenging the legality  of  the  proceedings  dated  14.12.2009  the
first respondent approached the High Court. By the  judgment  under  appeal,
the first respondent's writ petition came to be allowed by a Division  Bench
setting aside the order impugned therein.

9.    The High Court recorded the submissions made before it as follows:
      "3.   The learned counsel appearing  for  the  petitioner  raised  two
      contentions, viz.:

        i) The bank cannot bypass section 13(4) of  the  SARFAESI  Act  and
           invoke the provisions of section 14.  He  would  submit,  before
           invoking  section  14,  that  notice  under  section  13(4)   is
           necessary, otherwise the provisions of appeal under  section  17
           will become illusory, particularly when  the  proceedings  under
           section 14 cannot be questioned  by  filing  appeal  before  the
           Tribunal or before a Court.

       ii) In the event the procedures contemplated under  Rule  8  of  the
           Security Interest (Enforcement) Rules, 2002,  are  not  followed
           before section 14 is invoked, the  order  passed  by  the  Chief
           Judicial Magistrate would be contrary  to  the  said  Rules  and
           consequently, the order passed under section 14 is liable to  be
           set aside."

10.   It is argued before the High  Court  as  well  as  before  us  by  the
respondent that a secured creditor before  invoking  the  authority  of  the
Magistrate under section  14  must  necessarily  make  an  attempt  to  take
possession of the secured asset. Only when the creditor faces resistance  to
such an attempt the creditor could resort to the procedure under section  14
of the Act.  According to the first respondent, section  17[4]  of  the  Act
provides an "appeal" only against the measures taken by the  creditor  under
section 13(4)[5] of the Act and no  such  appeal  is  available  against  an
action taken by the  Judicial  Magistrate  under  section  14  of  the  Act.
Therefore, permitting the  creditor  to  invoke  section  14  without  first
resorting to the procedure under section 13(4) would deprive  the  owner  of
the secured  asset  an  opportunity  to  prefer  an  "appeal"  to  have  his
grievances adjudicated.  It is further argued that Rule 8  of  the  Security
Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the  Rules")
contemplates a procedure to be followed which includes  a  certain  mode  of
publicity of taking possession to be made, and therefore, even a  Magistrate
exercising power under section 14 of the Act is also required to follow  the
procedure contemplated under Rule 8 though the Rule does not  expressly  say
so.  Failure to comply with the requirement of Rule 8 in  the  instant  case
vitiated the order of the Magistrate.

11.   The abovementioned submissions found favour with the High Court.

12.   The learned counsel appearing for the appellant argued before us  that
the Act provided for two alternative procedures  for  taking  possession  of
the secured assets under sections 13(4) and 14 respectively.  While  section
13(4) authorises the creditor himself to  take  possession  of  the  secured
assets without the aid of the State's coercive  power,  section  14  enables
the secured creditor to seek the assistance of the  State's  coercive  power
for securing the possession of the secured assets.  It is submitted that  it
is always open to the secured creditor to choose one of  the  abovementioned
two procedures in a given case to obtain possession  of  the  secured  asset
depending  upon  his  own  assessment  of  the   situation   regarding   the
possibility of resistance (by the debtor or guarantor as the  case  may  be)
for taking possession of the secured assets.  It is also submitted that  the
fact that an "appeal" under section 17 is  available  against  the  measures
taken under section 13(4) and such an "appeal" is not available against  the
measures taken by the Magistrate under section 14 does not necessarily  mean
that the procedure under section 14 cannot  be  resorted  to  without  first
exhausting the measures contemplated under section  13(4).   Lastly,  it  is
submitted on behalf of the appellant that the High  Court  completely  erred
in recording a conclusion:
      "3.   In the event the secured creditor  bypassing  the  provision  of
      section 13(4) and the rule 8 and files an  application  under  section
      14, a situation may arise that the advocate commissioner may  straight
      away take possession without there being  compliance  of  any  of  the
      provisions of section 13(4) or rule 8.  When both the  provisions  are
      read  together,  we  could  only  come  to  the  conclusion  that  the
      legislature  had  not  intended  to  create  such  a  situation.   The
      objection of section 14 is only to be  invoked  in  case  the  secured
      creditor faces  obstruction  and  not  as  a  routine,  bypassing  the
      provisions of section 13(4).

13.   On the other  hand,  the  learned  counsel  appearing  for  the  first
respondent reiterated the submissions made by him before the High Court.

14.   To decide  the  correctness  of  the  judgment  under  appeal,  it  is
essential that we examine the purpose and the scheme of the  Act.    One  of
the professed purposes sought to be achieved by the enactment  as  evidenced
by the Objects and Reasons appended to the Bill is as follows:-
        "....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 place of recovery of defaulting loans and mounting
        levels  of   non-performing   assets   of   banks   and   financial
        institutions."

15.   In order to achieve the said purpose,  sections  13,  14  and  15  are
enacted.  Only sections 13 and 14  are  relevant  for  the  present  appeal.
Section  13(1)[6]  enables  the  secured  creditor  to  enforce  a  security
interest which such creditor has in a secured asset without intervention  of
the Court or Tribunal.  The expression "security interest" is defined  under
section 2 (zf) as follows:-
        "security interest" means right, title and  interest  of  any  kind
        whatsoever upon property, created in favour of any secured creditor
        and includes any mortgage, charge, hypothecation, assignment  other
        than those specified in section 31;

16.   Sub-section (2) authorises the secured creditor  to  exercise  any  of
the rights under sub-section (4).  Sub-section (2) reads as follows:-
        (2) Where any borrower, who is  under  a  liability  to  a  secured
        creditor  under  a  security  agreement,   makes  any  default   in
        repayment of secured  debt  or  any  instalment  thereof,  and  his
        account in respect of such   debt  is  classified  by  the  secured
        creditor as non-performing asset, then, the  secured  creditor  may
        require the  borrower by notice in writing to discharge in full his
        liabilities to the secured creditor  within  sixty  days  from  the
        date of notice failing which the secured creditor shall be entitled
        to exercise all or any of the rights under subsection (4).

18.   It can be  seen  from  the  said  sub-section  that  for  the  secured
creditor to take possession of the secured assets, the following  conditions
must be satisfied:  (i) That there must be  a  security  agreement[7]  which
creates the liability of the borrower  to  make  repayment  to  the  secured
creditor of the secured debt, (ii)  The  secured  creditor  is  required  to
demand the borrower by notice in writing to  discharge  the  full  liability
within a period of 60 days from the date of the notice.

19.   Sub-section (3)[8] stipulate that such notice shall give  the  details
of (i) the amount payable by the borrower (ii) the interest in  the  secured
asset intended to be enforced by the secured creditor.   Sub-section  (4)[9]
provides for various measures which  can  be  resorted  to  by  the  secured
creditor in order to recover  his  debt.    Such  measures  are  (1)  taking
possession of the secured asset or (2) taking over  the  management  of  the
business of the borrower.[10]   The  secured  creditor  is  also  given  the
right either to make a further assignment of his interest or lease  out  the
secured assets or sell the same in order to realise his  debt.   Such  right
of the secured creditor is hedged with  limitations/safeguards  designed  to
protect interest of the borrower so that the secured creditor may not  abuse
his rights i.e. except to take a possession of  the  property  and  alienate
the same only to the extent necessary to realise the actual  amount  due  to
him. Details of which may not be necessary for the  purpose  of  this  case.
We are only concerned in this case with  the  method  and  manner  in  which
possession of the secured  assets  could  be  obtained  and  the  conditions
precedents that are required to be satisfied for taking  possession  of  the
secured assets.

20.   Section 13, as originally enacted, did not contain any  provision  for
consideration of objections (if any) the borrower may  have  to  the  demand
made under  sub-section  (2).    However,  this  Court  in  Mardia  Chemials
Limited v. Union of India [(2004) 4 SCC 311],  where  the  constitutionality
of the Act fell for the consideration of this Court,  noticed  that  section
13(2) is a very stringent provision and opined:-

        "77. It is also true that till the stage of making  of  the  demand
        and notice under Section 13(2)  of  the  Act,  no  hearing  can  be
        claimed for by the borrower. But looking to the stringent nature of
        measures to be taken without intervention of court with  a  bar  to
        approach the court or any other forum at  that  stage,  it  becomes
        only reasonable that the secured creditor must bear in mind the say
        of the borrower before such a process of recovery is  initiated  so
        as to demonstrate that the reply of  the  borrower  to  the  notice
        under Section 13(2) of the Act has been considered applying mind to
        it. The reasons, howsoever brief they may be, for not accepting the
        objections, if raised in the reply, must  be  communicated  to  the
        borrower.  True,  presumption  is  in  favour  of  validity  of  an
        enactment and a legislation may not  be  declared  unconstitutional
        lightly more so, in the matters relating  to  fiscal  and  economic
        policies resorted to in the public interest, but while resorting to
        such legislation it would be necessary  to  see  that  the  persons
        aggrieved get a fair deal at the  hands  of  those  who  have  been
        vested with the powers to enforce drastic steps to make recovery."

21.   Consequent upon the said decision, Parliament  introduced  sub-section
3A[11] by Act 30 of 2004,  which  now  provides  for  consideration  of  the
objections, if any raised by the  borrower.   By  definition  under  section
2(f) of the Act a borrower includes the guarantor of the debt.

22.   Section 3A further provides that if the  secured  creditor  reaches  a
conclusion that the objections raised by the borrower are not acceptable  or
tenable, the creditor shall communicate the reasons  for  non-acceptance  of
the objections within a period of 15 days.   The proviso to  the  said  sub-
section declares that the rejection of the objections does  not  confer  any
right on the borrower to resort  to  the  proceedings,  contemplated  either
under section 17 or 17A.   We may indicate here both  sections  17  and  17A
afford an opportunity  to  the  borrower  to  approach  the  Debts  Recovery
Tribunal or (in the cases of Jammu & Kashmir) the concerned  District  Court
against any measure taken under section 13(4).

23.   In every  case  where  the  objections  raised  by  the  borrower  are
rejected by the secured creditor, the secured creditor is entitled  to  take
possession of the secured assets.   In our opinion,  such  action  -  having
regard to the object and scheme of the Act - could be taken directly by  the
secured creditor.  However, visualising the possibility  of  resistance  for
such action, Parliament under section  14  also  provided  for  seeking  the
assistance of the judicial power of the State for  obtaining  possession  of
the secured asset, in those cases where the secured creditor seeks it.

24.   Under the scheme of section 14, a  secured  creditor  who  desires  to
seek the assistance of the State's coercive power for  obtaining  possession
of the secured asset is required to make a request in writing to  the  Chief
Metropolitan Magistrate or District Magistrate  within  whose  jurisdiction,
secured asset is located praying that the secured asset and other  documents
relating thereto may be taken possession thereof.  The language  of  section
14  originally  enacted  purportedly  obliged  the  Magistrate  receiving  a
request under section 14  to  take  possession  of  the  secured  asset  and
documents, if any, related thereto in terms of the request received  by  him
without any further scrutiny of the matter.

25.   However, the Bombay High Court in the case of  Trade  Well  v.  Indian
Bank [2007 CrilJ 2544] opined;
        "2 ...CMM/DM acting under Section 14 of the NPA Act is not required
        to give notice either to the borrower or to the 3rd party.

        3. He has to only verify from the  bank  or  financial  institution
        whether notice under Section 13(2) of the NPA Act is given  or  not
        and whether  the  secured  assets  fall  within  his  jurisdiction.
        There is no adjudication of any kind at this stage.

        4. It is only if the above conditions are not  fulfilled  that  the
        CMM/DM can refuse to pass an order under Section 14 of the NPA  act
        by recording that the above  conditions  are  not  fulfilled.    If
        these two conditions are fulfilled, he cannot  refuse  to  pass  an
        order under Section 14."

The said judgment was followed by the Madras  High  Court  in  the  case  of
Indian Overseas Bank v. M/s. Sri Aravindh  Steels Ltd. [AIR 2009  Mad.  10].
 Subsequently, Parliament inserted a proviso to section 14(1)[12]  and  also
sub-section 1A[13] by Act 1 of 2013.

26.   We must make it clear that these provisions were not in  existence  on
the  date  of  the  order  impugned  in  the  instant  proceedings.    These
amendments are made to provide  safeguards  to  the  interest  of  borrower.
These provisions stipulate that  a  secured  creditor  who  is  seeking  the
intervention of the Magistrate under section  14  is  required  to  file  an
affidavit furnishing the information contemplated under various  sub-clauses
(i) to (ix) of the proviso and obligates the  Magistrate  to  pass  suitable
orders regarding taking of the possession of the secured assets  only  after
being satisfied with the contents of the affidavits.

27.   An analysis of the 9 sub-clauses of the proviso which  deal  with  the
information that is required to be furnished in the affidavit filed  by  the
secured  creditor  indicates  in  substance  that  (i)  there  was  a   loan
transaction under which a borrower is liable to repay the loan  amount  with
interest, (ii) there is a security  interest  created  in  a  secured  asset
belonging to the borrower, (iii) that the borrower committed default in  the
repayment, (iv) that a notice contemplated under section 13(2) was  in  fact
issued, (v) in spite of such  a  notice,  the  borrower  did  not  make  the
repayment, (vi) the objections of the borrower had in fact  been  considered
and rejected, (vii) the reasons for such rejection had been communicated  to
the borrower etc.

28.   The satisfaction of  the  Magistrate  contemplated  under  the  second
proviso to section 14(1) necessarily requires the Magistrate to examine  the
factual correctness of the assertions made in such an affidavit but not  the
legal niceties of the transaction.   It  is  only  after  recording  of  his
satisfaction the Magistrate can pass appropriate orders regarding taking  of
possession of the secured asset.

29.   It is  in  the  above-mentioned  background  of  the  legal  frame  of
sections 13 and 14, we are  required  to  examine  the  correctness  of  the
conclusions recorded by the High Court.   Having regard  to  the  scheme  of
sections 13 and 14 and the object of  the  enactment,  we  do  not  see  any
warrant  to  record  the  conclusion  that  it  is  only  after  making   an
unsuccessful attempt to take possession of  the  secured  asset,  a  secured
creditor can approach the Magistrate.  No doubt that a secured creditor  may
initially resort  to  the  procedure  under  section  13(4)  and  on  facing
resistance, he may still approach the Magistrate under section  14.     But,
it is not mandatory for the secured  creditor  to  make  attempt  to  obtain
possession on his own before approaching the Magistrate  under  section  14.
The submission that such a construction would  deprive  the  borrower  of  a
remedy under section 17 is  rooted  in  a  misconception  of  the  scope  of
section 17.

30.   The "appeal"  under  section  17[14]  is  available  to  the  borrower
against any measure taken under section 13(4).   Taking  possession  of  the
secured asset is only one of the measures that can be taken by  the  secured
creditor.  Depending upon the nature of the secured asset and the terms  and
conditions of  the  security  agreement,  measures  other  than  taking  the
possession  of  the  secured  asset  are  possible  under   section   13(4).
Alienating the asset either by lease or sale etc. and  appointing  a  person
to manage the secured asset are some of those  possible  measures.   On  the
other hand, section 14 authorises the Magistrate only to take possession  of
the property and forward the asset along with  the  connected  documents  to
the borrower.  Therefore, the borrower  is  always  entitled  to  prefer  an
"appeal"[15] under section 17 after the possession of the secured  asset  is
handed over to the secured creditor.  Section  13(4)(a)  declares  that  the
secured creditor may take possession of the secured  assets.   It  does  not
specify whether such a possession is to be obtained directly by the  secured
creditor or by resorting to the procedure under section 14.  We are  of  the
opinion that by whatever manner  the  secured  creditor  obtains  possession
either  through  the  process  contemplated  under  section  14  or  without
resorting to such a process obtaining of the possession of a  secured  asset
is always a measure against which a remedy under section 17 is available.

31.   It can be noticed from the language of the proviso to  section  13(3A)
and the language of  section  17  that  an  "appeal"  under  section  17  is
available to the borrower  only  after  losing  possession  of  the  secured
asset. The employment of the  words  "aggrieved  by....................taken
by the secured creditor" in  section  17(1)  clearly  indicates  the  appeal
under section 17 is available to the borrower only after  losing  possession
of the property.  To set at naught any doubt  regarding  the  interpretation
of section 17, the proviso[16] to sub-section (3A) of section  13  makes  it
explicitly clear that either the reasons  indicated  for  rejection  of  the
objections of the borrower or the likely  action  of  the  secured  creditor
shall not confer any right under section 17.

32.   The same principle is re-emphasised with the newly  added  explanation
in section 17(1) which came to be inserted by Act No.30 of 2004:
      "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."

33.   The High Court  opined  that  Rule  8[17]  of  the  Security  Interest
(Enforcement) Rules, 2002 provides for certain (i) procedure to be  followed
by the secured creditor taking possession of the secured  asset.   The  High
Court opined that even in a case where procedure contemplated under  section
14  is  resorted  to  for  obtaining  possession  of  the  secured   assets,
compliance with Rule 8 is mandatory.  Such a requirement  according  to  the
High Court arises because in view of the High Court:
       "The object of Section 14 is only to be invoked in case the  secured
       creditor faces obstruction  and  not  as  a  routine  bypassing  the
       provisions of Section 13(4)."


Under Rule 8, the secured creditor is required to deliver to the borrower  a
notice prepared as nearly as possible in Appendix IV to  the  Rules  and  by
affixing such notice to the property.  Further sub-rule (2)  which  came  to
be substituted in 2007 in original provides  that  the  notice  contemplated
under sub-rule (1) is required to be published  in  two  leading  newspapers
having sufficient circulation in the locality of which at least  one  should
be in vernacular language.  Prior to 2007 the requirement of publication  in
vernacular newspaper was not there.

34.   The High Court recognized  that  the  language  of  Rule  8  does  not
expressly warrant the compliance with  the  procedure  contemplated  therein
when section 14 is resorted to  for  obtaining  possession  of  the  secured
asset:
      "In the absence of the rule, the strict compliance of  the  provisions
      of section 13(4) and rule 8, even  in  case  of  possession  taken  by
      virtue of an order under section 14, assumes importance."

35.   We are of the opinion that the High Court clearly erred  in  recording
such a  conclusion.   The  language  of  Rule  8  does  not  demand  such  a
construction.   On  the  other  hand,  a  Magistrate  whose  functioning  is
structured by  the  Code  of  Criminal  Procedure  is  required  to  act  in
accordance with the provisions of the said code  unless  expressly  ordained
otherwise by any other law.  It is not a case that Cr.P.C. never  prescribed
for the procedure to be followed by the  Magistrate  in  a  case  where  the
Magistrate is required to take possession of property.  For  example,  under
section 83 of the Code,  a  criminal  Court  is  authorized  to  attach  the
movable or immovable property or both belonging to  a  proclaimed  offender.
Sub-sections (3) and (4) to section 83[18] specifically  provide  that  once
an order of attachment under sub-section (1) is made by the criminal  Court,
the property which is the subject matter of such attachment shall either  be
seized or taken possession of as the case may be  depending  upon  the  fact
whether  the  property  is  movable  or  immovable.  Both  the  sub-sections
contemplate the appointment of receiver.  It is declared  under  sub-section
(6) that the powers, duties and liabilities of a  receiver  appointed  under
section 83 are the same as those of a receiver appointed under the  Code  of
Civil Procedure, 1908.  Order XL of the Code of Civil Procedure  deals  with
the appointment of the receiver. Rule 1 authorizes the Court  to  appoint  a
receiver:
      "1.   Appointment of Receivers.-(1) Where it appears to the  Court  to
      be just and convenient, the Court may by order-

        a) appoint a receiver of any  property,  whether  before  or  after
           decree;

        b) remove  any  person  from  the  possession  or  custody  of  the
           property;

        c) commit the same to the possession, custody or management of  the
           receiver, and

        d) confer upon the receiver all such powers,  as  to  bringing  and
           defending suits and for the realisation, management, protection,
           preservation and improvement of the property, the collection  of
           the rents and profits thereof, the application and  disposal  of
           such rents and profits, and the execution of  documents  as  the
           owner himself has, or such of those powers as the  Court  thinks
           fit.

      (2)   Nothing in this rule shall authorise the Court  to  remove  from
      the possession or custody of property any person whom any party to the
      suit has not a present right so to remove."

It can also be noticed from Rule (1) that the power of the  Civil  Court  to
appoint a receiver could be exercised either before or after passing of  the
decree.

36.   Therefore, there is no  justification  for  the  conclusion  that  the
receiver appointed by the Magistrate is also required to follow  Rule  8  of
the Security Interest  (Enforcement)  Rules,  2002.   The  procedure  to  be
followed by the receiver is otherwise regulated by  law.   Rule  8  provides
for the procedure to be followed by secured creditor  taking  possession  of
the secured asset without the intervention of Court.   Such  a  process  was
unknown prior to the SARFAESI Act.  So, specific  provision  is  made  under
Rule 8 to ensure transparency in taking such possession.  We do not see  any
conflict  between  different  procedures  prescribed  by  law   for   taking
possession of the secured asset.  The finding of the High Court in our  view
is unsustainable.

37.   Thus, there will be three methods for the  secured  creditor  to  take
possession of the secured assets:-
      (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. 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
      documents. 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.

38.   In any of the three situations, after the possession  is  handed  over
to the secured creditor, the  subsequent  specified  provisions  of  rule  8
concerning the preservation, valuation and sale of the secured assets,,  and
other subsequent rules  from  the  Security  Interest  (Enforcement)  rules,
2002, shall apply.

39.   In this connection, it is material to refer to the judgment in  Mardia
Chemicals (supra) wherein the Court was  concerned  with  the  legality  and
validity of the SARFAESI Act.  The Court held the Act  to  be  valid  except
Section 17(2) thereof as it then stood. In paragraphs 59, 62 and 76  of  the
judgment the Court in terms held that in remedy under Section 17 of the  Act
was essentially like filing a suit in a Civil Court though it was called  an
Appeal.  It is also relevant to note that in  the  ultimate  conclusions  in
paragraph 80 of the judgment this  Court  held  in  sub-para  2  thereof  as
follows:-
      "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."

The grievance of the respondent that it will be left  with  no  remedy
is, therefore, misplaced.  As held by a bench  of  three  Judges  in  Mardia
Chemicals (supra), it would be open to the borrower to file an appeal  under
Section 17 any time after the measures are taken under Section  13  (4)  and
before the date of sale/auction of the property.  The same  would  apply  if
the secured creditor resorts to Section  14  and  takes  possession  of  the
property with the help of the officer appointed by the Magistrate.

40.   Coming to the facts of this case, a notice under section 13(2) was  in
fact served on the respondent for which the respondent  did  not  choose  to
respond.  Therefore, there was no occasion for  the  appellant  to  consider
the objections as there was none of the respondent against the  demand  made
in the said notice.  It is brought to our  notice  that  even  while  making
application under section 14 the appellant filed an affidavit  substantially
providing  for  the  necessary  information  contemplated  under  the  newly
introduced proviso to section 14 (1).  We have already  noticed  that  there
was no statutory requirement as on  the  date  when  the  application  under
section 14 was made in the instant case either to give such an affidavit  or
regarding the content of the affidavit.  Nonetheless the appellant chose  to
give such an affidavit.   A copy of which is  placed  before  us.   We  have
perused the affidavit and it  substantially  complies  with  the  conditions
stipulated in the newly introduced proviso.  May be the appellant did it  by
way of abundant caution to avoid any litigation.

41.   However, the respondent submitted before us that there is  nothing  in
the impugned order of the Magistrate which  indicates  that  the  Magistrate
applied his mind to such an affidavit and satisfied that it is necessary  to
deliver possession of the secured asset to the  appellant.   No  doubt  that
there is no material on record to show that the Magistrate applied his  mind
to the facts stated in the affidavit filed by the appellant.   On  the  date
of the impugned order the law did not oblige  the  Magistrate  to  undertake
any such exercise.  Apart from that we are satisfied on examination  of  the
content of the affidavit that  all  the  basic  requirements  necessary  for
granting the request of the appellant of delivery of the possession  of  the
secured asset are asserted to have  existed  on  the  date  of  application.
Therefore, we do not see any illegality in the impugned order.   The  appeal
is allowed.  The order of the High Court is set aside.

42.   In view of our conclusion on the scope of section 17 recorded  earlier
it would normally have been open to  the  respondent  to  prefer  an  appeal
under section 17 raising objections regarding legality of  the  decision  of
the Magistrate to deprive the respondent of the possession  of  the  secured
asset. But in view of the fact that the respondent chose  to  challenge  the
decision of the magistrate by invoking the jurisdiction of  the  High  Court
under Article 226 of the Constitution and in  view  of  the  fact  that  the
respondent does not have any substantive objection as can be discerned  from
the record, we make it clear that the respondent in the instant  case  would
not be entitled to avail the remedy  under  section  17  as  the  respondent
stalled the proceedings for a period of almost 4 years.   It  is  worthwhile
remembering that the respondent did not even choose to raise any  objections
to the demand issued under section 13(2) of the Act.  However,  we  make  it
clear that it is always open to the respondent to seek  restoration  of  his
property by complying with sub-section 8 of section 13 of the Act.

Criminal Appeal arising out of SLP (Crl) No. 6560 of 2011

43.   The first respondent in this appeal is the borrower in  a  transaction
to which V. Noble Kumar, the first respondent  in  Criminal  Appeal  arising
out of SLP(Crl) No. 2038 of 2011 was the surety.  The issue  in  the  appeal
is identical.  Therefore, for the reasons stated above, this appeal is  also
allowed.


                           ...............................................J.
                                         (H.L. Gokhale)




                           ...............................................J.
                                         (J. Chelameswar)
New Delhi;
August 22, 2013.































ITEM NO.1A           COURT NO.11           SECTION IIA
(For Judgment)
            S U P R E M E   C O U R T   O F   I N D I A
                         RECORD OF PROCEEDINGS

                      CRIMINAL APPEAL NO. 1218   OF  2013
                   (Arising out of SLP(Crl.) No.2038/2011)

STANDARD CHARTERED BANK                    Appellant(s)

                 VERSUS

V. NOBLE KUMAR AND ORS.                    Respondent(s)
                                    WITH

                       CRIMINAL APPEAL NO. 1217  OF  2013
                   (Arising out of SLP(Crl.) No.6560/2011)

SENIOR MANAGER, STATE BANK OF INDIA AND ANR. Appellant(s)

                 VERSUS
R. SHIVA SUBRAMANIYAN AND ANR.              Respondent(s)

Date: 22/08/2013  These matters were called on for pronouncement of
judgment today.


For Appellant(s) Mr. Sanjay Kapur,Adv.
                       Mr. Anmol Chandan,Adv.
                       Ms. Priyanka Das,Adv.

                       Mr. Mohd. Irshad Hanif,Adv.

For Respondent(s)      Mr. Vipin Nair,Adv.
               For     M/S. Temple Law Firm,Advs.

                 Mr. Venkita Subramoniam T.R.,Adv.



                  Hon'ble Mr. Justice J. Chelameswar pronounced the judgment
      of the Bench comprising of Hon'ble Mr. Justice H.L.  Gokhale  and  His
      Lordship.
                  Leave granted.
                  The appeals are allowed and the orders passed by the  High
      Court are set aside in terms of the signed judgment.


     (A.S. BISHT)                     (SNEH LATA SHARMA)
     COURT MASTER                  COURT MASTER
  (Reportable signed judgment is placed on the file)






-----------------------
[1]    Section 2 (zc) -  "secured asset" means the property on which
security interest is created;
[2]    Section 13(2) - Where any borrower, who is under  a  liability  to  a
secured creditor under a security agreement, makes any default in  repayment
of secured debt or any instalment thereof, and his  account  in  respect  of
such debt is classified by the secured  creditor  as  non-performing  asset,
then, the secured creditor may require the borrower by notice in writing  to
discharge in full his liabilities to the secured creditor within sixty  days
from the date  of  notice  failing  which  the  secured  creditor  shall  be
entitled to exercise all or any of the rights under sub-section (4).
[3]    14. Chief Metropolitan Magistrate or District  Magistrate  to  assist
secured creditor in  taking  possession  of  secured  asset.-(1)  Where  the
possession of any secured asset is required  to  be  taken  by  the  secured
creditor or if  any  of  the  secured  asset  is  required  to  be  sold  or
transferred by the secured creditor under the provisions of  this  Act,  the
secured creditor may, for the purpose of taking  possession  or  control  of
any  such  secured  asset,  request,  in  writing,  the  Chief  Metropolitan
Magistrate or the District Magistrate within  whose  jurisdiction  any  such
secured asset or other documents relating thereto may be situated or  found,
to take possession thereof, and the Chief  Metropolitan  Magistrate  or,  as
the case may be, the District Magistrate shall, on such request  being  made
to him-
      (a)   take possession of such asset and  documents  relating  thereto;
and
      (b)   forward such assets and documents to the secured creditor;



[4]     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 alongwith such fee, as  may  be  prescribed
to the Debts Recovery Tribunal having  jurisdiction  in  the  matter  within
forty-five days from the date on which such measure had been taken:
            ............     .........        ............
.............    ...........


            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.


      .
[5]    13(4) In case the borrower fails to discharge his liability  in  full
within the period specified in sub-section (2),  the  secured  creditor  may
take recourse to one or more of the following measures to recover
      his secured debt, namely:--
      (a)   take possession of the secured assets of the borrower including
           the right to transfer by way of  lease, assignment or  sale  for
           realising the secured asset;
      (b)   take over the  management  of  the  business  of  the  borrower
           including the right to transfer by way of lease,  assignment  or
           sale for realising the secured asset:


            Provided that the right to transfer by way of lease,  assignment
or sale shall be exercised only where the substantial part of  the  business
of the borrower is held as security for the debt:

            Provided further that where  the  management  of  whole  of  the
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.
[6]    Section 13(1) Notwithstanding anything contained  in  section  69  or
section 69A of the Transfer of Property Act, 1882 (4 of 1882), any  security
interest created in favour of any secured creditor may be enforced,  without
the intervention of court or tribunal, by such creditor in  accordance  with
the provisions of this Act.
[7]    Section 2(zb)  "security agreement" means  an  agreement,  instrument
or any other document  or  arrangement  under  which  security  interest  is
created in  favour  of  the  secured  creditor  including  the  creation  of
mortgage by deposit of title deeds with the secured creditor;

[8]    Sub-Section (3)  The notice referred to in sub-section (2) shall
give details of the amount payable by the borrower and the secured assets
intended to be enforced by the secured creditor in the event of non-payment
of secured  debts by the borrower.

[9]    Section 13(4)  -   In  case  the  borrower  fails  to  discharge  his
liability in full within  the  period  specified  in  sub-section  (2),  the
secured creditor may take recourse to one or more of the following  measures
to recover  his secured debt, namely:--
      (a) take possession of the secured assets of  the  borrower  including
the right to transfer by way of  lease, assignment  or  sale  for  realising
the secured asset;
      (b)  take  over  the  management  of  the  business  of  the  borrower
including the right to transfer by  way of lease,  assignment  or  sale  for
realising the secured asset:
      PROVIDED that the right to transfer by way  of  lease,  assignment  or
sale shall be exercised  only where the substantial part of the business  of
the borrower is held as security for the debt:
      PROVIDED FURTHER that where the management of whole  of  the  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.

[10]   Section 2(f) - "borrower" means  any  person  who  has  been  granted
financial assistance by  any bank or financial institution or who has  given
any guarantee or created   any  mortgage  or  pledge  as  security  for  the
financial assistance granted by   any  bank  or  financial  institution  and
includes a person who becomes   borrower  of  a  securitisation  company  or
reconstruction company consequent  upon  acquisition by it of any rights  or
interest  of  any  bank  or  financial   institution  in  relation  to  such
financial assistance;
[11]   Section 3A - (3A) If, on receipt  of  the  notice  under  sub-section
(2), the borrower makes any representation  or  raises  any  objection,  the
secured creditor shall consider such representation or objection and if  the
secured creditor  comes  to  the  conclusion  that  such  representation  or
objection is not acceptable or tenable,  he  shall  communicate  within  one
week of receipt of such representation or objection  the  reasons  for  non-
acceptance of the representation or objection to the borrower:

[12]   14(1)   ........ x      x     x      x

            Provided that any application by the secured creditor  shall  be
accompanied by an affidavit duly affirmed by the authorised officer  of  the
secured creditor, declaring that-
        i)       the aggregate amount of financial assistance  granted  and
           the total claim of the  Bank  as  on  the  date  of  filing  the
           application;
       ii)       the borrower has created security  interest  over  various
           properties and that the Bank or Financial Institution is holding
           a valid and subsisting security interest  over  such  properties
           and the claim of the Bank or Financial Institution is within the
           limitation period;
      iii)       the borrower has created security  interest  over  various
           properties giving the details of properties referred to in  sub-
           clause (ii) above;
       iv)       the borrower has committed default  in  repayment  of  the
           financial assistance granted aggregating the specified amount;
        v)         consequent  upon  such  default  in  repayment  of   the
           financial assistance  the  account  of  the  borrower  has  been
           classified as a non-performing asset;
       vi)       Affirming that the period of sixty days notice as required
           by the provisions of sub-section (2) of  section  13,  demanding
           payment of the defaulted financial assistance has been served on
           the borrower;
      vii)       The objection or representation in  reply  to  the  notice
           received from the borrower has been considered  by  the  secured
           creditor and reasons for non-acceptance  of  such  objection  or
           representation had been communicated to the borrower;
     viii)       The borrower has not made any repayment of  the  financial
           assistance in spite of  the  above  notice  and  the  Authorised
           Officer is,  therefore,  entitled  to  take  possession  of  the
           secured assets  under  the  provisions  of  sub-section  (4)  of
           section 13 red with section 14 of the principal Act;
       ix)       That the  provisions  of  this  Act  and  the  rules  made
           thereunder had been complied with:


            Provided further on receipt of the affidavit from the Authorised
Officer, the District Magistrate or the Chief  Metropolitan  Magistrate,  as
the case may be, shall after satisfying the contents of the  affidavit  pass
suitable orders for the purpose of taking possession of the secured assets:


            Provided also that the requirement of filing affidavit stated in
the first proviso shall not apply to proceeding pending before any  District
Magistrate or the Chief Metropolitan Magistrate, as the case may be, on  the
date of commencement of this Act.

[13]     14 (1A).      The District Magistrate  or  the  Chief  Metropolitan
magistrate may authorise any officer subordinate to him,-
        i)       to take possession of such assets and  documents  relating
           thereof; and
       ii)       to forward  such  assets  and  documents  to  the  secured
           creditor.
            (2)   For the purpose of securing compliance with the provisions
of sub-section (1),  the  Chief  Metropolitan  Magistrate  or  the  District
Magistrate may take or cause to be taken such steps and use, or cause to  be
used, such force, as may, in his opinion, be necessary.
      (3)   No act of the Chief  Metropolitan  Magistrate  or  the  District
Magistrate any officer authorised by the Chief  Metropolitan  Magistrate  or
District Magistrate done in pursuance of this section  shall  be  called  in
question in any court or before any authority.

[14]    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 alongwith such fee, as  may  be  prescribed
to the Debts Recovery Tribunal having  jurisdiction  in  the  matter  within
forty-five days from the date on which such measure had been taken:


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



[15]   Mardia Chemials Limited v. Union of India [(2004) 4  SCC  311],   The
expression appeal as originally existed in Section 17 is substituted by  the
word representation in  view  of  the  judgment  of  this  Court  in  Mardia
Chemicals Case.
            We may like to observe that proceedings under Section 17 of  the
Act, in fact, are not appellate proceedings.  It seems  to  be  a  misnomer.
In fact it is the  initial  action  which  is  brought  before  a  forum  as
prescribed under the Act, raising grievance against the action  or  measures
taken by one of the parties to the contract. It  is  the  stage  of  initial
proceeding like filing  a  suit  in  civil  court.   As  a  matter  of  fact
proceedings under Section 17 of the Act are in lieu of a  civil  suit  which
remedy is ordinarily available but for the bar under Section 34 of  the  Act
in the present case.

[16]    Provided that the reasons so communicated or the  likely  action  of
the secured creditor at the stage of  communication  of  reasons  shall  not
confer any right upon the borrower to prefer an  application  to  the  Debts
Recovery Tribunal under Section 17 or the  Court  of  District  Judge  under
Section 17A.
[17]   Rule 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, as soon as possible but in any  case   not  later  than  seven
days from the date of taking possession, in two leading newspapers,  one  in
vernacular language having sufficient circulation in that locality,  by  the
authorised officer.

[18]    83. Attachment of property of  person  absconding.-  (1)  The  Court
issuing a proclamation under section 82 may, for reasons to be  recorded  in
writing, at any  time  after  the  issue  of  the  proclamation,  order  the
attachment of any property, movable or immovable, or both, belonging to  the
proclaimed person:
            Provided that where at the time of the issue of the proclamation
the Court is satisfied,  by  affidavit  or  otherwise  that  the  person  in
relation to whom the proclamation is to be issued, -
            (a)    is about to dispose of the whole or any part of his
property, or
            (b)   is about to remove the whole or any part of  his  property
           from the local jurisdiction of the Court,
      it may order the attachment  simultaneously  with  the  issue  of  the
proclamation.

      (2)   Such order  shall  authorize  the  attachment  of  any  property
belonging to such person within the district in which it  is  made;  and  it
shall authorize the attachment of any  property  belonging  to  such  person
without such district when endorsed by the District Magistrate within  whose
district such property is situate.

      (3) If the property ordered to be attached is a debt or other movable
property, the attachment under this section shall be made-
            (a)   by seizure; or
            (b)   by the appointment of a receiver; or
            (c)   by an order in writing prohibiting the  delivery  of  such
           property to the proclaimed person or to any one on  his  behalf;
           on
            (d)    by all or any two of such methods, as the Court thinks
fit.

      (4)   If the  property  ordered  to  be  attached  is  immovable,  the
attachment under this section shall, in the case of land paying  revenue  to
the State Government, be made through  the  Collector  of  the  district  in
which the land is situate, and in all other cases-
            (a)   by taking possession; or
            (b)   by the appointment of a receiver; or
            (c)   by an order in writing prohibiting the payment of rent  on
           delivery of property to
           the proclaimed person or to any one on his behalf; or
            (d)   by all or any two of such methods, as the Court thinks
fit.

      (5)   If the property ordered to be attached  consists  of  live-stock
or is of a perishable nature, the Court may,  if  it  thinks  it  expedient,
order immediate sale thereof, and in such case  the  proceeds  of  the  sale
shall abide the order of the Court.

      (6)   The powers, duties  and  liabilities  of  a  receiver  appointed
under this section shall be the same as those of a receiver appointed  under
the Code of Civil Procedure, 1908(5 of 1908).



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