Hon'ble Alok Mathur,J.
In Writ Petition No.11142 (MB) of 2019, the petitioner-Bank has challenged the order dated 15.05.2015 passed by the District Magistrate, Lucknow in Case No.547 of 2014 (Bank of Baroda Vs. SAP Media and others), under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (In short ''SARFAESI Act'). The petitioner-Bank, inter alia, has also sought for a direction to the District Magistrate, Lucknow to consider and allow the application dated 18.12.2018 filed under the aforesaid section and to provide police force immediately in view of the provisions of SARFAESI Act and also to ensure peaceful possession of the secured asset i.e. House No.3/ 333, Viratkhand, Gomti Nagar, Lucknow. In this writ petition, the petitioner of Writ Petition No.5354 (MB) of 2019 has been arrayed as respondent no.4.
In Writ Petition No.5354 (MB) of 2019, the petitioner Harbinder Singh has sought for a direction to the respondent-Bank of Baroda to handover the actual physical possession of the auctioned property or to refund the amount of Rs.38,20,000/- to the petitioner with interest @ 24% per annum with quarterly interest from the date of deposit by the petitioner with the respondent-Bank till the date of payment.
As in the afore-captioned writ petitions facts are common and both pertain to the same property, they have been clubbed together and are being decided by a common ordr.
Learned Counsel for the petitioner-Bank has submitted that SAP Media Factory (respondent no.3) had availed an Over Draft Facility of Rs.25/- lakh against the secured asset, which was sanctioned vide letter dated 28.12.2006. The respondent no.3 has not maintained its account as per the terms and conditions of sanction, therefore, the petitioner-Bank was compelled to classify the account of respondent no.3 as "Non Performing Asset" on 31.03.2008 as per the guidelines of the Reserve Bank of India. After classification of the aforesaid loan account as Non Performing Asset, the petitioner-Bank initiated recovery proceedings under SARFAESI Act and the symbolic possession of the secured asset was taken on 14.11.2013. Thereafter, a sale notice dated 31.01.2015 was published and in pursuance thereof, the sale was conducted on 03.03.2015 and after receiving entire sale amount, the petitioner-Bank had issued Sale Certificate in favour of Mr. Harbinder Singh (respondent no.4) on 04.04.2015.
Learned Counsel for the petitioner-Bank has further submitted that the proprietor of respondent no.3, namely, Abhinav Mishra and his wife, namely, Mrs. Priyanka Mishra, who are the guarantors of the secured asset, initially have filed applications bearing Securitisation Applications No.262 of 2009 and 240 of 2011 before the Debt Recovery Tribunal, which were disposed of on the assurance of the applicants that they will pay the dues of the Bank but failed to do so.
He further submits that the Securitisation Application No.88 of 2015 was allowed by the Debt Recovery Tribunal, vide order dated 18.01.2016, directing the petitioner-Bank to handover the possession of the secured asset to the respondent no.3 and refund the sale amount to the respondent no.4 with interest @ 5% per annum from the date of taking money till the date of actual payment.
Feeling aggrieved by the order dated 18.01.2016, the petitioner-Bank had filed an appeal before the Debt Recovery Appellate Tribunal under Section 18 of the SARFAESI Act, which was allowed vide order dated 16.11.2017 setting aside the order dated 18.01.2016 passed by the Debt Recovery Tribunal and the petitioner-Bank was given liberty to take appropriate steps for taking over the possession of the property in question and to deliver the same to the auction purchaser.
Learned Counsel for the petitioner-Bank again submits that when the aforesaid Securitisation Applications No.262 of 2009 and 240 of 2011 was rejected, the petitioner-Bank initiated proceedings under the SARFAESI Act and moved an application dated 25.03.2014 under Section 14 of the said Act before the District Magistrate, which was rejected vide impugned order dated 15.05.2015 on the ground that the Bank has sold the secured asset in favour of the respondent no.4, therefore, the Bank has no locus to file such application.
Learned Counsel for the petitioner-Bank has contended that the order impugned passed by the District Magistrate is totally illegal, arbitrary and contrary to the judgment of the Apex Court rendered in the case of ITC Limited Vs. Blue Coast Hotels Limited and others; (2018) 15 SCC 99. He further contends that as per the provision of Section 14 of the SARFAESI Act, the District Magistrate is bound to provide assistance when it is required by the secured guarantor to take over the physical possession of the secured asset and to handover the same to the secured creditor.
After hearing the learned Counsel for the parties, the only question which arises for consideration before this Court is as to whether the petitioner-Bank remained a secured creditor after auction of the secured asset and whether the District Magistrate was correct in rejecting the application of the petitioner on this count.
The contention of the petitioner-Bank is that in exercise of power under Section 13 (4) of the SARFAESI Act, a symbolic possession of the property in question was taken on 14.11.2013 and subsequently the property was auctioned. Thereafter an application under Section 14 was moved and was also forwarded to the secured creditor.
A perusal of the order impugned reveals that the said order has been passed by the District Magistrate on the ground that the petitioner-Bank had sold the secured asset and now it is not the owner of the secured asset and, therefore, the application moved under Section 14 is not maintainable and accordingly rejected the same after considering the objections filed against it. In the order impugned, it has been observed by the District Magistrate that in the application, the petitioner-Bank has concealed the fact that the property in question has been sold by the Bank before taking physical possession of the same.
After considering the definition of financial asset as contained in Section 2(1)(l) of the SARFAESI Act, in para 48 of ITC Limited's case (Supra), the Apex Court has held as under:
"48. In this case, the creditor did not have actual possession of the secured asset but only a constructive or symbolic possession. The transfer of the secured asset by the creditor therefore cannot be construed to be a complete transfer as contemplated by Section 8 of the Transfer of Property Act. The creditor nevertheless had a right to take actual possession of the secured assets and must therefore be held to be a secured creditor even after the limited transfer to the auction purchaser under the agreement. Thus, the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus remained a secured creditor in the Act."
From the aforesaid pronouncement of the Apex Court, it is clear that the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus the Bank remained a secured creditor. The petitioner-Bank continued to be a secured creditor till possession of the property is not taken back or pass on to the auction purchaser. Therefore, the reasoning given in the impugned order is not sustainable in the eye of law and is liable to be set aside.
Accordingly, the Writ Petition No.11142 (MB) of 2019 is allowed and the impugned order dated 15.05.2015 passed by the District Magistrate, Lucknow is hereby set aside. Consequently, the District Magistrate, Lucknow is directed to pass a fresh order on the application of the petitioner-Bank moved under Section 14 of the SARFAESI Act within a period of 30 days from the date of production of a certified copy of this order.
Since we have issued direction in Writ Petition No. 11142(MB) of 2019 to the District Magistrate to consider and pass fresh order on the application under Section 14 of the Act, the writ petition no. 5354 (MB) of 2019 filed by the auction purchaser also stands disposed of in above terms.
Order Date :- 31.5.2019 akverma