TaxTMI 
TaxTMI 
2009 (7) TMI 765
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....17-9-2002, and 21-9-2002, for the recovery of Rs. 1,56,47,638 and Rs. 1,40,18,468.36, respectively. 3. As the respondent and its sister concern did not respond to the said demand notices, the appellant-Bank invoked section 13(4) of the above Act and took possession of the secured assets on 4-12-2002. The said action of the Bank, as also the vires of the SARFAESI Act, were challenged by the respondent partnership firm and its sister concern by way of two separate writ petitions, being Writ Petition Nos. 46328 and 46329 of 2002, in which an interim stay of all further proceedings under the said Act was granted on 27-12-2002. The said writ petitions were ultimately heard and dismissed by a common order on 23-4-2004, with liberty to the respondent-firm to approach the Debts Recovery Tribunal (hereinafter referred to as 'the DRT'), within 30 days. Since, despite such liberty, the respondent-firm did not approach the DRT, the Bank took a decision to sell the secured assets of the respondent-firm. At that stage, negotiations were held between the parties for a One-Time Settlement, which also failed, causing the Bank to issue a sale notice dated 26-7-2007, inviting sealed tenders for the ....
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.... which the present appeal has been preferred. 6. Appearing for the appellant-Bank, Mr. V.T Gopalan, learned Senior Advocate, urged that before the learned Single Judge it had been contended that the provisions of the SARFAESI Act being similar to an English mortgage, on the issuance of notice under section 13(4) thereof and upon taking over possession of the secured assets, the property vested with the Bank which was thereafter at liberty to bring it to sale as it deemed fit and proper. It had also been submitted that despite liberty having been granted to the respondent-firm to move the DRT within the time permitted under the said order, the respondent-firm had chosen not to do so and was, therefore, precluded from challenging the same subsequently. In this regard, reliance had been placed on the decision of this Court in Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513 in which the validity of the SARFAESI Act had been challenged. While upholding the constitutional validity of the Act, it was also held that the steps taken pursuant to notice under section 13(4) of the Act could not be challenged before the DRT under section 17 of the SARFAESI Act beyond the period presc....
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....he rules do not contemplate the involvement of the borrower in the sales process and the Authorized Officer is also empowered under rule 8 of the Security Interest (Enforcement) Rules, 2002, to sell the secured assets by way of private treaty. 9. Mr. Gopalan lastly contended that the Writ Appeal No. 926 of 2008 had been filed against the order of the learned Single Judge dated 23-6-2008, made in Review Application No. 165 of 2007 filed by the Bank for review of the order dated 18-9-2007, passed in the writ petition filed by the Bank and that such appeal was not maintainable having regard to the provisions of Order 47 Rule 7 of the Code of Civil Procedure. Consequently, the order passed therein was invalid on such score as well and was liable to be set aside. 10. While adopting Mr. Gopalan's submissions, Mr. Altaf Ahmed, learned Senior counsel appearing for the Auction Purchaser in the appeal arising out of S.L.P.(C) No. 3020 of 2009, submitted that the action taken by the Bank under section 13(4) of the SARFAESI Act was not governed by the provisions of the Limitation Act. He urged that section 13(2) of the Act, which deals with the enforcement of security interest, does not pres....
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....ver or possession is taken of the secured assets of the borrower. In such a case, the Tribunal has power to restore possession in favour of the borrower, if such action taken under sub-section (4) of section 13 is declared invalid. 14. The main question which falls for determination in this appeal is whether the DRT would have jurisdiction to consider and adjudicate with regard to post section 13(4) events or whether its scope in terms of section 17 of the SARFAESI Act would be confined to the stage contemplated under section 13(4), as contended on behalf of the appellants. An additional question with regard to the maintainability of the appeal will have to be taken into consideration while deciding the present appeal. 15. In order to answer the aforesaid questions which arise in this appeal, it will be necessary to look into the relevant provisions of sections 13 and 17 of the SARFAESI Act, as they originally stood and as they now stand after the amendments effected thereto by the amending Act of 2004. 16. In the Statement of Objects and Reasons of the amending Act reference has been made to the decision of this Court in Mardia Chemicals Ltd.'s case (supra). It has been mention....
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....al, by such creditor in accordance with the provisions of this Act. (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) 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. (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 communicat....
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....[may make an application along with 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. [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.] [(2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion t....
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....may be, dispose of the application in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) and the rules made thereunder.]" 21. It is clear that while enacting the SARFAESI Act, the Legislature was concerned with measures to regulate securitisation and reconstruction of financial assets and enforcement of security interest. The Act enables the Banks and Financial Institutions to realise long-term assets, manage problems of liquidity, asset liability mismatches 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. The provisions of section 13 enable the secured creditors, such as Banks and Financial Institutions, not only to take possession of the secured assets of the borrower, but also to take over the management of the business of the borrower, including the right to transfer by way of lease, assignment or sale for realizing secured assets, subject to the conditions indicated in the two provisos to clause (b) of sub-section (4) of section 13. 22. In order to prevent misuse of such wide powers and ....