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Issues: (i) Whether filing an application under section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 automatically suspends the secured creditor's right to proceed with auction and whether the Tribunal may impose a condition of deposit while granting stay of auction; (ii) whether, before final disposal of proceedings under section 17, the Debts Recovery Tribunal or the Debts Recovery Appellate Tribunal can pass an interim mandatory order for restoration of possession or restoration of management; (iii) whether the scope of enquiry under section 17 permits the Tribunal to examine all grounds rendering the bank's action illegal while testing the validity of measures taken under section 13(4).
Issue (i): Whether filing an application under section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 automatically suspends the secured creditor's right to proceed with auction and whether the Tribunal may impose a condition of deposit while granting stay of auction.
Analysis: The statutory scheme treats the borrower's remedy under section 17 as arising only after measures are taken under section 13(4). Section 17 contains no express provision creating an automatic stay on filing the application. The amended provisions were intended to secure speedy recovery of secured debts and must receive a construction that advances that object. The Tribunal, however, has ancillary jurisdiction to grant interim protection in appropriate cases, and such relief may be conditioned in a manner considered fit and proper.
Conclusion: Filing of an application under section 17 does not automatically suspend the secured creditor's right to proceed with auction, and the Tribunal may impose a deposit condition while granting stay of auction.
Issue (ii): Whether, before final disposal of proceedings under section 17, the Debts Recovery Tribunal or the Debts Recovery Appellate Tribunal can pass an interim mandatory order for restoration of possession or restoration of management.
Analysis: The power under section 17(3) to restore possession or management arises only after the Tribunal concludes that the secured creditor's measures under section 13(4) are not in accordance with the Act and the Rules. Although the Tribunal has ancillary power to pass interim orders, that power cannot be used to bypass the specific statutory scheme by directing redelivery of possession or restoration of management before the application is finally decided.
Conclusion: The Tribunal has no power to pass an interim mandatory order for restoration of possession or restoration of management before finalisation of proceedings under section 17.
Issue (iii): Whether the scope of enquiry under section 17 permits the Tribunal to examine all grounds rendering the bank's action illegal while testing the validity of measures taken under section 13(4).
Analysis: Proceedings under section 17 are concerned with the legality and validity of the secured creditor's measures under section 13(4), not with adjudication of the exact quantum of debt. All grounds that would render the bank's action illegal, including objections going to maintainability and legal sustainability, may be raised before the Tribunal. The Tribunal's task is to determine whether the measures were in accordance with the Act and the Rules.
Conclusion: All grounds that render the bank's action illegal can be raised under section 17, but the Tribunal need not determine the exact amount due while deciding validity of the measures.
Final Conclusion: The reference was answered by affirming that there is no automatic stay on filing under section 17, conditional stay is permissible, interim mandatory restoration cannot be ordered before final adjudication, and the Tribunal's enquiry is confined to the legality of the secured creditor's measures.
Ratio Decidendi: A proceeding under section 17 challenges the legality of measures taken under section 13(4); it does not create an automatic stay, though the Tribunal may grant conditional interim relief, and restoration of possession or management can follow only after a final finding of illegality.
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