W.P.No.9044 of 2009 M/s.B.P.V.Classic Tea Factory (P) Ltd., rep.by its Managing Director, D.K.Baskaran, 401/A, Kotagiri Road, Kattabettu Post, Nilgiris. ..Petitioner ..vs..
Corporation Bank, Coonoor Branch, rep.by its Authorized Officer, Mr.V.Bhaskar Pai, No.88, 89, Sims Park Road, Gray's Hill, Coonoor. ..Respondent W.P.No.10228 of 2009 M/s.Merit Resorts Pvt.Ltd., rep.by its Director Mrs.S.Shalini, No.1997, 13th Main Road, Anna Nagar, Chennai-600 040. ..Petitioner ..vs..
1. The Authorised Officer, Canara Bank, Teynampet Branch, Teynampet, Chennai-18.
2. Sri Lakshmi Ammal Educational Trust, rep.by its Authorised Signatory S.K.Anantharaj, No.29, Tilak Street, T.Nagar, Chennai-600 017. ..Respondents W.P.No.9043 of 2009 filed under
Article 226 of the Constitution of India, for issuance of a Writ of Certiorari, calling for the entire records on the file of the Sessions Judge, Nilgiris in Crl.M.P.No.424 of 2008 and quash the order dated 16.04.2009 granting police protection to take possession of the petitioner's property measuring a total extent of 14.17 acres including factory in R.S.No.163/3, 161, 210/1B, 210/2, 233/2, 121/10, 121/1, 372/3, 68/2C2 in Kengarai Village, Kotagiri Taluk, Nilgiris District and 8.74 acres in R.S.No.202/2, 203/1, 203/2A1 and 457/4 in Konavakorai Village, Kotagiri Taluk, Nilgiris District.
W.P.No.9044 of 2009 filed under
Article 226 of the Constitution of India, for issuance of a Writ of Certiorari, calling for the entire records on the file of the Sessions Judge, Nilgiris, in Crl.M.P.No.2 of 2009 and quash the order dated 09.04.2009 granting police protection to take possession of the petitioner's property bearing door No.401-A and 1.23 acres of land in R.S.No.500/1 and 501/A, Naduhatty Panchayat, Kotagiri, The Nilgiris.
W.P.No.10228 of 2009 filed under
Article 226 of the Constitution of India, for issuance of a Writ of Certiorari, calling for the records on the file of the Sessions Judge of Nilgiris at Udhagamandalam in Crl.M.P.No.141 of 2009 and quash the order dated 29.04.2009 granting police protection to take possession of the petitioner's property measuring to an extent of 10.34 acres, namely, the land and building bearing Door No.4/278, Ooty-Kothagiri Main Road, Doddabetta Junction, Nilgiris-643 001 comprised in R.S.No.222/1, New R.S.No.630/1 building measuring 77,222 sq.ft.
For Petitioners : Mr.K.Sridhar (W.P.9043 & 9044/2009) Mr.G.Desingu in W.P.10228/2009 For Respondents : Mr.K.Sankaran for R1(W.P.9043/2009 Ms.A.L.Gandhimathi for R2(9043/2009) Mr.S.Sethuraman in W.P.9044/2009 Mr.B.K.Seshadri for Mr.Srinath Sridevan for R1 (W.P.10228/2009) Mr.G.Masilamani, Senior Counsel for Mr.Venkatesh Mahadevan for R2 (W.P.10228/2009) COMMON ORDER R.SUBBIAH, J., Since the issue involved in all the writ petitions is one and the same, they are disposed of by a common judgment.
2. The core issue involved in all the writ petitions is, whether the respondents banks can take possession of the secured assets after issuing sale certificates in respect of auction purchasers.
3. The facts, which necessitated to raise the above question by the writ petitioners, are as follows:
The petitioner in W.P.No.9043 of 2009 is M/s.Kathikkal Tea Plantations, represented by its Managing Director. The petitioner had availed a loan from the 1st respondent bank by mortgaging the property viz., the land measuring to 1.7 acres in R.S.No.163/3, 161, 210/1B, 210/2, 233/2, 121/10, 121/1, 372/3, 68/2C2 in Kengarai Village, Kotagiri Taluk, Nilgiris District and another 8.74 acres in R.S.No.202/2, 203/1, 203/2A1 and 457/4 in Konavakorai Village, Kotagiri Taluk, Nilgiris District. Since there was a default in making payment to the respondent bank by the petitioner, the debt is classified as 'non-performing asset' and the respondent bank had issued notice on 27.01.2006 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "the Act") to discharge the liability to the bank within sixty days from the date of notice. Subsequently, on failure to discharge the liability in full by the petitioner, as required under section 13(4) of the Act, the respondent bank had issued a possession notice under Section 13(4) on 11.12.2006 to the petitioner. Pursuant to the said notice, the respondent bank had taken a symbolic possession of the property and sold the said property by a private treaty on 09.04.2007 to one P.Srinivasa Varma, Hyderabad, for a sale consideration of Rs.75.60 lakhs and issued a sale certificate in favour of the purchaser on 09.04.2007. Since only symbolic possession was taken by the bank and the secured debtor, namely, the petitioner, was not actually dispossessed and had continued to be in de facto possession of the property, even after issuance of the sale certificate in favour of the purchaser and, therefore, the respondent bank filed an application in Crl.M.P.No.424 of 2008 before the Chief Judicial Magistrate, Udhagamandalam, on 13.11.2008 under Section 14(1)(2) of the Act, seeking an order to take possession of the petitioner's property with the help of police aid and hand over the same to the respondent bank. By order dated 16.04.2009, permission was granted to the respondent bank to take possession of the property with the help of police assistance. Aggrieved over the same, the petitioner has filed the present writ petition to set aside the order dated 16.04.2009 passed in Crl.M.P.No.424 of 2008. The facts in the other writ petition namely W.P.No.9044 of 2009 are also similar to the facts of W.P.No.9043 of 2009. Hence, it is not necessary to narrate the facts of W.P.No.9044 of 2009.
4. So far as W.P.No.10228 of 2009 is concerned, the writ petitioner is a Private Limited Company. The directors of the writ petitioner company are M/s.Sarangapani, Shalini and Harshavardhan. The said petitioner company borrowed a loan from the 1st respondent to the tune of Rs.13 crores and subsequently, defaulted in making the repayment. Therefore, demand notice under section 13(2) was issued followed by notice under section 13(4). After several legal proceedings, finally the bank had issued a sale certificate in favour of the 2nd respondent auction purchaser, viz., Sri Lakshmi Ammal Educational Trust on 15.10.2007 and the sale certificate was issued and registered on 17.10.2007. One of the mortgaged properties, namely, R.S.No.222/1 in the Sub-Registration District of Ootacamund in the Doddabetta Panchayat together with a building thereon measuring 77.222 sq.ft.bearing door No.4/278, Ooty-Kotagiri Road, Doddabetta Junction, Nilgiris was leased out to M/s.Merit International Education Foundation from 15.02.2007 pursuant to a lease agreement entered into between the writ petitioner company and the said Merit International Education Foundation. But the Directors of both the firms are one and the same. Hence, the 1st respondent bank filed an application under section 14(1) in Crl.M.P.No.141 of 2009 as against the writ petitioner and its directors and also the lessee before the Sessions Judge, Udhagamandalam, seeking necessary police protection to take possession of the secured property and the permission sought was also granted by order dated 29.04.2009. Aggrieved over the same, the petitioner company has filed the present writ petition to set aside the order passed by the learned Sessions Judge, Udhagamandalam.
5. In view of the bone of contentions raised by the borrowers in the respective writ petitions, the questions which have now arisen for consideration before this Court are, whether the respective banks are legally entitled to take physical possession of the properties after issuance of the sale certificates in favour of the auction purchasers and as a follow up action, whether the respondents banks can maintain an application under Section 14(1)(2) of the Act before the concerned Judicial Magistrate, seeking the police assistance to take possession of the secured assets ?
6. According to the learned counsel appearing for the petitioner/borrower in W.P.No.10228 of 2009, the Act assigns judicial powers to the banks and they can enforce their rights under
section 13(4) of the Act to take possession of the property and bring the same for sale without intervention of the Court of law, if the dues of the borrower characterised as 'non-performing assets'. If the borrower is aggrieved by the proceedings of the bank, they can approach the Debts Recovery Tribunal under Section 17 of the Act. Under Section 13(6) of the Act, after taking possession or after taking over the management of the secured assets as per
section 13(4) of the Act, the secured creditor or manager on behalf of the secured creditor shall transfer the secured asset in favour of the transferee. Section 13(8) of the Act provides that the dues of the secured creditor tendered at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditor. Process of taking possession of the secured assets is governed by Rule 8 of the SARFAESI Rules. As per Rule 8(1), the authorised officer on behalf of the secured creditor shall deliver a possession notice to the mortgagor prepared in form given in Appendix IV of the Rules. Under the SARFAESI Act, if the dues of the borrower once characterised as 'non-performing assets', the bank, as the secured creditor, can take possession of the property and bring them for sale without the intervention of the Court of law by following the various measures prescribed under
Section 13 of the SARFAESI Act. Immediately after characterising the debt of the borrower as a non-performing asset, the bank, as the secured creditor, make a demand by notice under
section 13(2) of the SARFAESI Act, to pay the outstanding amount within 60 days from the receipt of the notice, failing which, by issuing a possession notice, as per Rule 8(1) of the SARFAESI Rules, as prescribed in Appendix IV of the Rules, to the mortgagor, and then the secured creditor take possession of the properties and for that purpose, under Rule 8(4) he shall take steps for protection of secured assets till they are sold or disposed of. After taking possession of the properties, the secured creditor/bank can transfer the same in favour of the transferee with all rights as if the transfer had been made by the owner of such secured asset. But, in the instant case, the bank took only a symbolic possession or constructive possession by issuing a notice under
section 13(4). The actual physical possession of the property was not taken by the bank and the borrower/secured debtor was not actually dispossessed but they were allowed to be in de facto possession of the property. After bringing the property in public auction and after issuing the sale certificate as per Rule 9(6) and confirming the sale in favour of the successful bidder in the form prescribed under Appendix V of SARFAESI Rules, the respondent bank initiated action to dispossess the borrower from the property and sought the assistance of police by filing an application under section 14(1)(2) of the SARFAESI Act. Aggrieved over the said action of the bank, the borrower/writ petitioner now has raised a dispute that once the sale certificate was issued in favour of the auction purchaser of the property, there is no secured debt and the bank also loses the character of secured creditor. Therefore, the question of 'actual taking physical possession' does not arise after the issuance of the sale certificate. The reason for raising such dispute is mainly based on the language employed under
section 14(1) of SARFAESI Act, which reads as follows:
"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".
Thus, by referring to the words used in Section 14(1), namely, 'secured creditor' and 'secured asset', it was contended by the learned counsel for the petitioner in W.P.No.10228 of 2009 that the bank ought to have taken physical possession of the secured asset even before the issuance of the sale certificate by resorting to section 14(1). The banks, having taken only a symbolic possession or constructive possession of the secured asset and having failed to take the actual physical possession while resorting to the measures under
section 13 of the SARFAESI Act, do not have a right to take physical possession of the property after issuance of the sale certificate, since it lost the character of secured asset as defined under
section 2(zc). Further, it was contended by the learned counsel for the petitioner in W.P.10228 of 2009 that the object of the SARFAESI Act is only to recover the due amount payable and once the amount is recovered and the sale certificate is issued, the bank goes out of the picture. Under such circumstances, the application under
section 14(1)(2) seeking police assistance by the bank is not maintainable. Thus, he prays for quashing of the order.
7. It is further contended by the learned counsel that the secured creditor ought to have taken extra care to take actual physical possession at the time of issuing notice itself under
section 13(4) because
section 13 specifically says that the property can be transferred only after taking possession. Therefore, the practice adopted by the banks by taking symbolic possession or constructive possession, and then completing the entire proceedings by issuing a sale certificate, cannot resort to take physical possession of the property. Learned counsel for the petitioner also relied on a judgment reported in TRANSCORE ..vs.. UNION OF INDIA AND ANOTHER (2006(5) CTC 753 in support of his contention that the banks are entitled to take the actual possession of the secured assets from the borrower or from any other person in terms of
section 13(4) of the SARFAESI Act and the bank shall vest in the transferee all rights in relation to the secured assets as if the transfer has been made by the owner of such secured assets. Any party aggrieved by such dispossession, can take recourse to approach the Debts Recovery Tribunal under
section 17(4) of the SARFAESI Act. If the party is dispossessed, not in accordance with the provisions of the Act, then the Debts Recovery Tribunal is entitled to put the clock back by resorting the status quo ante. Thus, he contended that the bank in failure of taking actual possession under
section 13(4) stage, cannot resort to take actual physical possession after issuance of the sale certificate.
8. Learned counsel appearing for the respondent bank in W.P.No.10228 of 2009 contended that
section 13(4) empowers the bank to take possession of the secured assets and take over the management of the business of the borrower. It does not say anything about the actual physical possession. The object of the SARFAESI Act is only to realise long term assets, manage problems of liquidity, asset liability mis-match and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. In other words, the object of the SARFAESI Act is a speedy recovery of the non-performing assets. Further,
section 13 does not say that the transfer has to be effected under
section 13(6) only after taking physical possession. If the dues of the secured creditor are tendered at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditor. Therefore, before the confirmation of sale, the property can be recouped by the borrower if he tenders the amount. On failure to pay the amount only, the sale is confirmed and sale certificate is issued in accordance with Rule 9(6) of SARFAESI Rules. Nowhere in
section 13 of SARFAESI Act it has been stated that the right to transfer can be effected only after taking actual physical possession or that the exercise of taking over possession under
section 13(4) shall be of actual physical possession. After taking symbolic possession or constructive possession under
section 13(4), the borrower continues to be in the property only in de facto possession. Learned counsel has further contended that the language found in 14(1) has to be interpreted only in consonance with the objects of the SARFAESI Act. Therefore, it cannot be said that the word 'secured creditor' and 'secured debt' found in
section 14(1) does not mean that the bank lost the power to take actual possession, after issuance of the sale certificate.
9. Learned counsel for the respondent bank further contended that
section 13(10) of the SARFAESI Act states that where the dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditors may file an application in the form and manner as may be prescribed in the Debts Recovery Tribunal. Thus, by reading relevant provisions under
section 13(10), one could understand that the secured creditor remains as secured creditor and he does not cease to be so by executing a sale certificate. In support of his contention, the learned counsel relied on a plethora of decisions and further contended that
section 14(1) should not be read in isolation and it has to be a combined reading along with
sections 13 and
14 to have a correct interpretation.
10. Learned counsel appearing for the proposed party in W.P.No.9043 of 2009 submitted that the writ petitioner, who has not repaid the loan amount, is not entitled for any discretionary remedy under
Article 226 of Constitution of India. The mortgagor, who continues in possession of the property, in spite of creating a charge over the property in favour of the bank, ought not to be allowed to continue in possession and squat on the property. The sale certificate is to be satisfied only after recovery of money by sale and not concerned with possession.
Section 14 of the SARFAESI Act was enacted by the Parliament only to give power to the secured creditors to take possession of the property with the assistance of the concerned Magistrate. Had it been the intention of the Legislature that the object of the Act is only for recovery of money, then they would not have enlightened
Section 14. The incorporation of the provision should be purposeful and should be to effectuate with the object and the purpose of the Act. The interpretation which will defeat the object of the Act should be avoided. With regard to the contention on interpretation, the learned counsel for the proposed party has also relied on the decisions reported in 1992(1) SCC 361, 1986(2) SCC 237 and 2001(9) SCC 673.
11. The learned counsel appearing for the borrowers/writ petitioners and the respondent banks in W.P.No.9043 and 9044 of 2009 have also made the submissions similar to the submissions made in W.P.No.10228 of 2009. Heard the learned counsel appearing for all the parties.
12. In view of the above submissions, now the question to be decided is whether the Respondent banks are legally entitled to take physical possession of the property after issuance of the sale certificate in favour of the auction purchasers by filing petition under
section 14(1)(2) of SARFAESI Act before the concerned Magistrate. The statements and reasons for SARFAESI Act seem to be that the Act was enacted to reconstruction of financial assets and enforcement of security interest and for matters connected therein. The banks as 'secured creditor', as defined under section 2(zd) of the Act, are empowered under section 13(4) of the SARFAESI Act to take possession of the 'secured asset' as defined under
section 2(zc) and also empowered to transfer the same under section
13(6) of the SARFAESI Act. It is relevant to extract
Sections 13(4) and
13(6), which read as follows:
"13. Enforcement of security interest:
(4) In case the borrower fails to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured debt, namely:-
(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 of 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".
Section 13(6) reads as follows:
"Any transfer of secured asset after taking possession thereof or take over of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset".
13. Hence, it is clear from the above proviso, after taking possession under
section 13(4), the secured creditors can transfer the property or take over the management and they shall vest in the transferee all rights. Under
section 13(8), if the borrower paid the due amount with all costs, charges and expenses incurred by him are tendered to the secured creditor before the date fixed for sale, then the property shall of his own.
Section 13(10) defines that if the dues of the secured creditor are not full satisfied with the sale proceeds of the secured assets, he may file an application in the form and manner as may be prescribed to the Debtors Recovery Tribunal for recovery of the balance amount.
14. So far as in the present cases are concerned, the secured creditors, namely, the banks had taken only a symbolic possession under
section 13(4). Thereafter, by selling the property in public auction, they issued sale certificates in favour of the auction purchasers. Subsequently, the secured creditors proceeded to take possession since the secured debtors continue to be in de facto possession, by filing an application under
section 14(1) seeking the assistance before the District Magistrate as per the manner provided in the said proviso. The secured creditors are forced to go under
section 14(1) only when the borrowers/secured debtors are reluctant to hand over the possession even after issuance of the sale certificate. As reported in 2008(1) SCC 125 (cited supra) the dichotomy between symbolic and physical possession does not find place in the SARFAESI Act. Only possession notice has to be issued as per Rule 8(1) of SARFAESI Rules as prepared in terms of the Appendix IV of the Rules. Thereafter, by affixing the notice under Rule 8(1), the symbolic possession or constructive possession of the property is being taken up by the secured creditor as in the case of these writ petitions. Thereafter, after selling the property in public auction sale certificates were issued by the secured creditors as per Rule 9(6) in favour of the purchasers in the form given in Appendix V of the Rules. Now, the contention of the writ petitioners is that the banks ought to have taken due care while taking recourse to the measures provided under
section 13(4) itself to recover their secured debt. Once the sale certificate was issued and the money was recovered, the purpose is over and therefore, it cannot be termed as a 'secured creditor' and the property cannot be a 'secured debt'. Hence, the banks cannot take actual physical possession after issuance of the sale certificate by seeking assistance from the Magistrate under
section 14(1). The submissions of the learned counsel for the petitioners are based on the language employed in
section 14(1), namely, the secured creditor and secured debt.
Section 2(zc) defines 'secured asset' means the property on which security interest is created;
section 2(zd) defines 'secured creditor' as follows:
'Secured creditor' means any bank or financial institution or any consortium or group of banks or financial institutions and includes-
(i)debenture trustee appointed by any bank or financial institution; or
(ii) securitisation company or reconstruction company, whether acting as such or managing a trust set up by such securitisation company or reconstruction company for the securitisation or reconstruction, as the case may be; or
(iii) any other trustee holding securities on behalf of a bank or financial institution, in whose favour security interest is created for due repayment by any borrower of any financial assistance"
15. Now, the question is whether the submission made by the learned counsel for the petitioners based on the language found in
section 14(1) is correct and entertainable? In this regard, the submissions made by the learned counsel appearing for the banks and the auction purchasers can be taken into consideration for answering the submissions made by the petitioners based on the judgment reported in 2008(1) SCC 125 (Transcore ..vs.. Union of India) (cited supra). The relevant passage from the said judgment is as follows:
"74. Keeping the above conceptual aspect in mind, we find that
Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under
Section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realising the secured assets. Section 13(4-A) refers to the word possession simpliciter. There is no dichotomy in sub-section (4-A) as pleaded on behalf of the borrowers. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. It inter alia states that notice is given to the borrower who has failed to repay the amount informing him and the public that the bank/FI has taken possession of the property under
Section 13(4) read with Rule 9 of the 2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and delivery of possession. Rule 9(6) states that on confirmation of sale, if the terms of payment are complied with, the authorised officer shall issue a sale certificate in favour of the purchaser in the form given in Appendix V to the 2002 Rules. Rule 9(9) states that the authorised officer shall deliver the property to the buyer free from all encumbrances known to the secured creditor or not known to the secured creditor. (emphasis supplied)
Section 14 of the NPA Act states that 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, the secured creditor may, for the purpose of taking possession, request in writing to the District Magistrate to take possession thereof.
Section 17(1) of the NPA Act refers to the right of appeal.
Section 17(3) states that if DRT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under
Section 13(4) taken by the secured creditor are not in accordance with the provisions of the Act, it may by order declare that the recourse taken to any one or more measures is invalid, and consequently, restore possession to the borrower and can also restore management of the business of the borrower. Therefore, the scheme of
Section 13(4) read with
Section 17(3) shows that if the borrower is dispossessed, not in accordance with the provisions of the Act, then DRT is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. As stated above, the NPA Act provides for recovery of possession by non-adjudicatory process; therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8, undoubtedly, refers to sale of immovable secured asset. However, Rule 8(4) indicates that where possession is taken by the authorised officer before issuance of sale certificate under Rule 9, the authorised officer shall take steps for preservation and protection of secured assets till they are sold or otherwise disposed of. Under
Section 13(8), if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charges and expenses referred to in
Section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a Court Receiver under Order 40 Rule 1 CPC. The Court Receiver can take symbolic possession and in appropriate cases where the Court Receiver finds that a third-party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorised officer under Rule 8 has greater powers than even a Court Receiver as security interest in the property is already created in favour of the banks/FIs. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorised officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third-party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules".
16. From the above, the submission made by the learned counsel for the respondents that
section 14 of the Act cannot be read in isolation and has to be viewed in the context of all other provisions of the Act, such as Sections 13(4)(6)(8),15,17, 18 Rule 8(9) of SARFAESI Rules and
section 55 of the Transfer of Property Act is acceptable. These provisions are in conjunction with
section 14 of the Act for the purpose of interpretation, to be adopted, to achieve and sub-serve the object of the SARFAESI Act. Any other approach or interpretation will defeat the object of the Act. The object of the Act is only to enable the secured creditor, financial institutions to realise the long term assets, manage problems of liquidity, asset liability mis-match and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. Therefore, it could be understood that the Act was brought for recovering the amount in speedy manner in taking possession of the properties and in realising the money. The third party, who comes forward to purchase the secured asset, must have a confidence that he would get the title to the property at the earliest. If the transferring of the property by way of title is going to be delayed endlessly, then the object of the Act which is meant for speedy recovery, would be defeated in whole. Therefore, as contended by the learned counsel for the banks, that if interpretation is given by taking the words in isolation from
section 14, it would defeat the whole object. Only on a combined reading of
section 14 along with the other sections, it would give a clear picture of the object. In this regard, a useful reference could be placed on the decisions relied on by the learned counsel appearing for the impleaded party.
(i) (1986) 2 SCC 237 (M/s.Girdhari Lal and Sons ..vs.. Balbir Nath Mathur and others
(ii) (1992) 1 SCC 361 (Administrator, Municipal Corporation ..vs.. Dattatraya Dahankar)
(iii) 2001(9) SCC 673: (Nirathilingam ..vs.. Annaya Nadar and Others;
17. The relevant passages from the said decision (1986) 2 SCC 237 are as follows:
"7. Parliamentary intention may be gathered from several sources. First, of course, it must be gathered from the statute itself, next from the preamble to the statute, next from the Statement of Objects and Reasons, thereafter from parliamentary debates, reports of committees and commissions which preceded the legislation and finally from all legitimate and admissible sources from where there may be light. Regard must be had to legislative history too.
8. Once parliamentary intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the court to give the statute a purposeful or a functional interpretation. This is what is meant when, for example, it is said that measures aimed at social amelioration should receive liberal or beneficent construction. Again, the words of a statute may not be designed to meet the several uncontemplated forensic situations that may arise. The draftsman may have designed his words to meet what Lord Simon of Glaisdale calls the "primary situation". It will then become necessary for the court to impute an intention to Parliament in regard to "secondary situations". Such "secondary intention" may be imputed in relation to a secondary situation so as to best serve the same purpose as the primary statutory intention does in relation to a primary situation.
9. So we see that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed. Having ascertained the intention, the court must then strive to so interpret the statute as to promote or advance the object and purpose of the enactment. For this purpose, where necessary the court may even depart from the rule that plain words should be interpreted according to their plain meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be well justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment by supplementing the written word if necessary".
18. The relevant passage from the said decision (1992)1 SCC 361 is as follows:
"4. It seems to us that the High Court had a mechanical approach to construction. The mechanical approach to construction is altogether out of step with the modern positive approach. The modern positive approach is to have a purposeful construction that is to effectuate the object and purpose of the Act. Section 127-A must, therefore, receive a purposeful construction. Sub-section (1) contains a table for taxation. There is no provision for taxation in respect of a building having annual letting value less than Rs 1800. Clause (b) of sub-section (2) expressly exempts buildings and lands, the annual letting value of which does not exceed Rs 1800. The proviso permits adding up of annual letting value of all such buildings or lands owned by a single individual in the Municipality. The proviso no doubt states that the annual letting value aggregated shall be deemed to be for the purpose of this clause meaning thereby for the purpose of clause (b), that is for exemption. But the purpose of the proviso is to deny exemption to buildings or lands owned by the same person and of which the total annual letting value exceeds Rs 1800".
19. The relevant passages from 2001(9) SCC 673 are as follows:
20. "The principle is well settled that an interpretation of the statutory provision which defeats the intent and purpose for which the statute was enacted should be avoided. The decision of the Madras High Court in K.V.S.P. Subramanian case1 holding that since the creditor had already filed suits for recovery of the mortgage amount and the suits were pending, the debtor, who is the defendant in those suits, has to seek adjudication before the civil court on the question as to whether he is entitled to the benefit and if the court comes to the conclusion that he is entitled to the benefit of the Act then the court has to dispose of the suit in accordance with
Section 4 of the Act, in our view, does not lay down the law correctly. Accepting this view will render the provision regarding abatement of the suit redundant.
21. We are conscious of the position that the view taken by the Division Bench of the Madras High Court in K.V.S.P. Subramanian case1 has held the field for a good length of time. But as discussed earlier, the decision runs counter to the very intent and purpose for which the enactment was made. In such a situation the decision needs to be corrected and this has to be done despite the lapse of time".
20. A reading of the dictum laid down in the above judgments would give a clear picture that the mechanical way of interpreting the provisions made in the statute will lead to defeat the object of the Act. Here, when the object is to speedy recovery of debt, by way of taking possession on transferring the property in favour of third party and issued a sale certificate, it cannot be contended that once the sale certificate is issued, physical possession cannot be taken by the secured creditors. Further, in this regard, a useful reference could be placed on the judgment reported in KOTTAKKAL CO-OP.URBAN BANK LTD ..vs.. BALAKRISHNAN (2008(2)KLT 456). In that case, after taking a symbolic possession under
section 13(4) and selling the property in favour of the auction purchaser, the secured creditor approached the Chief Judicial Magistrate seeking the assistance for taking possession. The petition filed by the secured creditor under
section 14(1) was dismissed by the Magistrate holding that that the provision contained in
section 14 only enables the secured creditor to seek assistance of Court to take possession or control of property for effecting sale. Since the secured creditor had taken possession, effected sale and issued sale certificate, the provision cannot be invoked. Aggrieved over the same, the secured creditor preferred a writ petition before the High Court. The High Court while dealing with the case has held that there is no stipulation in
section 13 or elsewhere that the right to transfer can be exercised only after taking over the actual physical possession or that the exercise of taking over possession under
section 13(4) shall be of actual physical possession, resulting in complete dispossession of the secured debtor, de facto and de jure. The relevant passage in paragraph 5 is extracted hereunder:
"5....to complete a transfer by a secured creditor in favour of a third party, the necessary pre-condition is that possession is taken in terms of S.13(4) of the Act. A close reading of S.13(4)(a) would show that what is authorised thereby is the taking of possession of the secured asset, including the right to transfer. While taking over of possession is authorised and such taking over of possession includes the taking over of the right to transfer, there is no stipulation in
section 13 or elsewhere that the right to transfer can be exercised only after taking over the actual physical possession or that the exercise of taking over possession under
section 13(4) shall be of actual physical possession, resulting in complete dispossession of the secured debtor, de facto and de jure....At any rate, a secured debtor, continuing to hold on de facto possession on the ground of not having been dispossessed, would only be one who would have been given the advantage to continue to hold on de facto possession for the time during which different steps would have followed, resulting in the confirmation of sale in favour of a third party auction purchaser. In the absence of any jurisdictional requirement for de facto possession to make a transfer in terms of S.13(6), there is no legal or jurisdictional error in the sale being held by the secured creditor on the strength of de jure possession. Such a sale or transfer would have the complete support of S.13(6).
21. Therefore, in our opinion, in the absence of any specific stipulation in Section 13, the properties could be sold only after taking physical possession and also the combined reading of
sections 13 and 14 with the background of the object would show that it cannot be said that the secured creditor cannot take actual physical possession after issuing sale certificates merely for the reason that the language found in
section 14 refers to the secured creditor and secured asset. Further more, as contended by the learned counsel for the petitioner in W.P.No.10228 of 2009, that under sectio1n 13(10) even after sale, the bank can approach the Debts recovery Tribunal by filing application having jurisdiction or a competent court, for recovery of the balance amount. Further, the contention of the learned counsel for the banks that the character of the secured creditor cannot be said to be ceased by executing the sale certificate also cannot be ignored.
22. In view of the above discussions, we hereby hold that the respondents banks are entitled to take possession under
section 14(2) of the SARFAESI Act and the issuance of sale certificate is not a bar to take physical possession and the writ petitioners are not entitled for the reliefs sought for. Consequently all the writ petitions fail and are dismissed. No costs. Connected M.Ps.are closed.
gl To
1. The Chief Manager, State Bank of India 5/273, Kil-Kotagiri Branch, Kil-Kotagiri Bazaar Post, The Nilgiris.
2. The Authorisez Officer, Mr.V.Bhaskar Pai, Corporation Bank, Coonoor Branch, No.88, 89, Sims Park Road, Gray's Hill, Coonoor.
3. The Authorised Officer, Canara Bank, Teynampet Branch, Teynampet, Chennai 18