Cited:
1) W.P. No. 353 of 2014 (M/s. Mercury Exporters and Manufacturing Pvt. Ltd. & anr. v. Punjab National Bank and anr
2) APO No. 177 of 2014 (M/s. Mercury Exporters and Manufacturing Pvt. Ltd. & anr. v. Punjab National Bank and anr
3) Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. & ors (Criminal Appeal No. 736 of 2014)
Held: Bona Fide Tenent/Lessee can approach DRT under Sec 17 after issue of sale notice
Kolkata High Court (Appellete Side)
S. Vision Comptech Integrators ... vs State Bank Of India on 20 June, 2014
Author: Dipankar Datta
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
PRESENT : HON'BLE JUSTICE DIPANKAR DATTA
W.P. No.16033 (W) of 2014
M/s. Vision Comptech Integrators Ltd.
Vs
State Bank of India & ors.
For the petitioner : Mr. Surajit Nath Mitra, Sr. Advocate Mr. N. Srinivas, Advocate
Mr. S.N. Pandey, Advocate
For the respondents : Mr. Shamit Sanyal, Advocate Ms. Shahana Naznin, Advocate
Heard on June 6, 2014
Judgment on : June 20, 2014
...............
11. However, such understanding has taken a toss with the enunciation of law in the decision in V. Noble Kumar (supra). While considering when an
application/appeal under Section 17 could be presented, it has clearly been laid
down therein that a borrower is entitled to prefer an appeal under Section 17 of
the Act after the possession of the secured asset is handed over to the secured
creditor (paragraph 27), and appeal under Section 17 is available to the borrower
only after losing possession of the property (paragraph 28). The decision also
lays down the law that after 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, as well as the rules following the same,
would apply (paragraph 36.4).
12. It would be proper at this stage to quote hereunder the relevant paragraphs from the said decision:
"27. The 'appeal' under Section 17 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 (sic the secured creditor).
Therefore, the borrower is always entitled to prefer an 'appeal' 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.
28. It can be noticed from the language of the proviso to Section 13(3-A) 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' (emphasis supplied) 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 to sub-section (3-A) 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.
36. Thus, there will be three methods for the secured creditor to take possession of the secured assets.
36.1. (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.
36.2. (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 scrutinise 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.
36.3. (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 scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under clause 36.2.(ii) above.
36.4. In any of the three situations above, 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."
(underlining by me for emphasis)
13. Mr. Mitra contended that the observations made in paragraph 27 of the decision must be confined to cases where Section 14 of the Act is invoked by the secured creditor, whereas the observations made in paragraph 28 could apply to cases where symbolic possession is taken and not actual physical possession. According to him, what the Supreme Court intended to mean by the words 'losing possession' is that the secured creditor had taken action in terms of Section 13(4)(a) by issuing a possession notice in Appendix IV and, therefore, even at that stage, an application under Section 17 of the Act would be maintainable. He also contended that the decision does not, in so many words, lay down the law that issuance of the possession notice is a condition precedent for taking possession of the secured asset.
14. I am afraid, the submissions of Mr. Mitra do not appeal to me in view of the
observations made in paragraph 36 and its several sub-paragraphs extracted
supra. Paragraph 36.1 says that the secured creditor has to take possession and
thereafter proceed for sale of the secured assets to realise the amounts claimed by
it. Paragraph 36.4 refers to "possession ... handed over to the secured creditor"
and not 'losing possession'. My reading of the decision in V. Noble Kumar (supra), insofar as a borrower [as defined in Section 2(f) of the Act] is concerned, is that 'handing over of possession' and 'losing possession' carry the same meaning in the sense that the same could be used inter-changeably as and when the secured creditor gets physical possession of the secured asset and that it is only after handing over of physical possession of the secured asset from the borrower to the secured creditor that the borrower acquires the right to move the Tribunal.
Although not arising for a decision directly on this writ petition, the
tribunals/Courts in an appropriate case may have to consider whether a sale
notice in respect of a secured asset can at all be issued after valuing such asset,
without possession thereof being handed over to the secured creditor from the
borrower in view of the decision in V. Noble Kumar (supra). My understanding of the Supreme Court's interpretation of the relevant law in that case is that steps for preservation, valuation and sale of a secured asset must follow possession of the secured asset. I have not been able to read paragraph 36.4 otherwise.
15. To protect a bona fide lessee or tenant from being drowned in a situation of no remedy being available under the Act, the Supreme Court in Harshad Govardhan Sondagar (supra) has even read the requirement of complying with natural justice in Section 14 of the Act before an order is made by the relevant magistrate. The effect is that what was otherwise a non-adjudicatory process would now partake the character of a quasi-judicial proceeding.
16. Be that as it may, here the sale notice has been issued. I need not examine at this stage whether the sale notice could have been issued without possession of the said property being handed over to the secured creditor. However, bearing in mind the decision in Harshad Govardhan Sondagar (supra), in a case where the
aggrieved person claims to be or is a bona fide lessee or a tenant from whom
possession is yet to be taken over but a sale notice has been issued involving the
leasehold or tenanted property, different considerations would apply and even
without losing possession or handing over of possession of the portion of the
secured asset under lease or tenancy to the secured creditor, the lessee or the
tenant, as the case may be, being a non-borrower would have the right to
approach the tribunal no sooner the sale notice is issued in terms of the provisions of Rule 8(6) of the Rules, and notwithstanding the decisions in V. Noble Kumar (supra) and Mercury (supra). This, I hold, because V. Noble Kumar (supra) did not have the occasion to deal with a grievance espoused by a person who claimed himself to be a bona fide lessee or tenant and any observation made therein may not apply to a non-borrower. If this right of the non-borrower is not recognized, he shall be without a remedy.
17. Consequently, I hold that the relevant tribunal having jurisdiction under Section 17 of the Act on being approached has a duty to consider the status of the party approaching it to arrive at a considered opinion as to whether the application should be entertained or not. If it is approached by an applicant like the petitioner, claiming itself to be a bona fide tenant, the decision in V. Noble Kumar (supra) and Mercury (supra) would not apply, since there the measures under Section 13(4) of the Act taken by the secured creditors were challenged by the borrowers within the meaning of Section 2(f) of the Act and not by a non-borrower like the petitioner.
18. The writ petition, accordingly, stands disposed of granting liberty to the petitioner to apply under Section 17 of the Act, if it is aggrieved by the sale notice that has been issued by the bank.
19. There shall be no order for costs.
20. Observations made hereinabove are only for the disposal of this writ petition and the parties are free to raise all other points available to them in law before the tribunal, if it is approached by the petitioner.
Urgent certified copy of this judgment and order, if applied for, may be furnished to the applicant at an early date.
(DIPANKAR DATTA, J.)
1) W.P. No. 353 of 2014 (M/s. Mercury Exporters and Manufacturing Pvt. Ltd. & anr. v. Punjab National Bank and anr
2) APO No. 177 of 2014 (M/s. Mercury Exporters and Manufacturing Pvt. Ltd. & anr. v. Punjab National Bank and anr
3) Harshad Govardhan Sondagar v. International Assets Reconstruction Co. Ltd. & ors (Criminal Appeal No. 736 of 2014)
Held: Bona Fide Tenent/Lessee can approach DRT under Sec 17 after issue of sale notice
Kolkata High Court (Appellete Side)
S. Vision Comptech Integrators ... vs State Bank Of India on 20 June, 2014
Author: Dipankar Datta
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
APPELLATE SIDE
PRESENT : HON'BLE JUSTICE DIPANKAR DATTA
W.P. No.16033 (W) of 2014
M/s. Vision Comptech Integrators Ltd.
Vs
State Bank of India & ors.
For the petitioner : Mr. Surajit Nath Mitra, Sr. Advocate Mr. N. Srinivas, Advocate
Mr. S.N. Pandey, Advocate
For the respondents : Mr. Shamit Sanyal, Advocate Ms. Shahana Naznin, Advocate
Heard on June 6, 2014
Judgment on : June 20, 2014
...............
11. However, such understanding has taken a toss with the enunciation of law in the decision in V. Noble Kumar (supra). While considering when an
application/appeal under Section 17 could be presented, it has clearly been laid
down therein that a borrower is entitled to prefer an appeal under Section 17 of
the Act after the possession of the secured asset is handed over to the secured
creditor (paragraph 27), and appeal under Section 17 is available to the borrower
only after losing possession of the property (paragraph 28). The decision also
lays down the law that after 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, as well as the rules following the same,
would apply (paragraph 36.4).
12. It would be proper at this stage to quote hereunder the relevant paragraphs from the said decision:
"27. The 'appeal' under Section 17 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 (sic the secured creditor).
Therefore, the borrower is always entitled to prefer an 'appeal' 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.
28. It can be noticed from the language of the proviso to Section 13(3-A) 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' (emphasis supplied) 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 to sub-section (3-A) 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.
36. Thus, there will be three methods for the secured creditor to take possession of the secured assets.
36.1. (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.
36.2. (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 scrutinise 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.
36.3. (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 scrutinise the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under clause 36.2.(ii) above.
36.4. In any of the three situations above, 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."
(underlining by me for emphasis)
13. Mr. Mitra contended that the observations made in paragraph 27 of the decision must be confined to cases where Section 14 of the Act is invoked by the secured creditor, whereas the observations made in paragraph 28 could apply to cases where symbolic possession is taken and not actual physical possession. According to him, what the Supreme Court intended to mean by the words 'losing possession' is that the secured creditor had taken action in terms of Section 13(4)(a) by issuing a possession notice in Appendix IV and, therefore, even at that stage, an application under Section 17 of the Act would be maintainable. He also contended that the decision does not, in so many words, lay down the law that issuance of the possession notice is a condition precedent for taking possession of the secured asset.
14. I am afraid, the submissions of Mr. Mitra do not appeal to me in view of the
observations made in paragraph 36 and its several sub-paragraphs extracted
supra. Paragraph 36.1 says that the secured creditor has to take possession and
thereafter proceed for sale of the secured assets to realise the amounts claimed by
it. Paragraph 36.4 refers to "possession ... handed over to the secured creditor"
and not 'losing possession'. My reading of the decision in V. Noble Kumar (supra), insofar as a borrower [as defined in Section 2(f) of the Act] is concerned, is that 'handing over of possession' and 'losing possession' carry the same meaning in the sense that the same could be used inter-changeably as and when the secured creditor gets physical possession of the secured asset and that it is only after handing over of physical possession of the secured asset from the borrower to the secured creditor that the borrower acquires the right to move the Tribunal.
Although not arising for a decision directly on this writ petition, the
tribunals/Courts in an appropriate case may have to consider whether a sale
notice in respect of a secured asset can at all be issued after valuing such asset,
without possession thereof being handed over to the secured creditor from the
borrower in view of the decision in V. Noble Kumar (supra). My understanding of the Supreme Court's interpretation of the relevant law in that case is that steps for preservation, valuation and sale of a secured asset must follow possession of the secured asset. I have not been able to read paragraph 36.4 otherwise.
15. To protect a bona fide lessee or tenant from being drowned in a situation of no remedy being available under the Act, the Supreme Court in Harshad Govardhan Sondagar (supra) has even read the requirement of complying with natural justice in Section 14 of the Act before an order is made by the relevant magistrate. The effect is that what was otherwise a non-adjudicatory process would now partake the character of a quasi-judicial proceeding.
16. Be that as it may, here the sale notice has been issued. I need not examine at this stage whether the sale notice could have been issued without possession of the said property being handed over to the secured creditor. However, bearing in mind the decision in Harshad Govardhan Sondagar (supra), in a case where the
aggrieved person claims to be or is a bona fide lessee or a tenant from whom
possession is yet to be taken over but a sale notice has been issued involving the
leasehold or tenanted property, different considerations would apply and even
without losing possession or handing over of possession of the portion of the
secured asset under lease or tenancy to the secured creditor, the lessee or the
tenant, as the case may be, being a non-borrower would have the right to
approach the tribunal no sooner the sale notice is issued in terms of the provisions of Rule 8(6) of the Rules, and notwithstanding the decisions in V. Noble Kumar (supra) and Mercury (supra). This, I hold, because V. Noble Kumar (supra) did not have the occasion to deal with a grievance espoused by a person who claimed himself to be a bona fide lessee or tenant and any observation made therein may not apply to a non-borrower. If this right of the non-borrower is not recognized, he shall be without a remedy.
17. Consequently, I hold that the relevant tribunal having jurisdiction under Section 17 of the Act on being approached has a duty to consider the status of the party approaching it to arrive at a considered opinion as to whether the application should be entertained or not. If it is approached by an applicant like the petitioner, claiming itself to be a bona fide tenant, the decision in V. Noble Kumar (supra) and Mercury (supra) would not apply, since there the measures under Section 13(4) of the Act taken by the secured creditors were challenged by the borrowers within the meaning of Section 2(f) of the Act and not by a non-borrower like the petitioner.
18. The writ petition, accordingly, stands disposed of granting liberty to the petitioner to apply under Section 17 of the Act, if it is aggrieved by the sale notice that has been issued by the bank.
19. There shall be no order for costs.
20. Observations made hereinabove are only for the disposal of this writ petition and the parties are free to raise all other points available to them in law before the tribunal, if it is approached by the petitioner.
Urgent certified copy of this judgment and order, if applied for, may be furnished to the applicant at an early date.
(DIPANKAR DATTA, J.)
Comments
Post a Comment