TaxTMI 
TaxTMI 
2016 (1) TMI 281
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.... ownership of the petitioner in property No.A-27, East of Kailash, New Delhi without due process of law. Other reliefs are also sought. 2. The brief facts which led to filing of the writ petition are that the petitioner claims to be the owner of the ground floor, first floor and second floor of the property A-27, East of Kailash, New Delhi by means of three different registered sale deed. It is stated that the said plot was originally allotted by DDA on lease hold basis to Shri Anand Kumar Chona vide deed dated 01.09.1972. The said Mr.Chona got the property converted from lease hold to free hold vide registered conveyance deed dated 24.09.2001. Different floors were thereafter sold to different persons by the said Shri Anand Kumar Chona. The petitioner purchased the ground floor of the property from one Shri Satinder Singh on payment of the sale consideration of Rs. 1.10 crores vide registered sale deed dated 10.06.2011. The first floor was purchased from Shri Rakesh Jain after payment of a sale consideration of Rs. 1 crore vide registered sale deed dated 10.06.2011. The second floor is stated to have been purchased from Shri Tirath Singh and Smt.Gulshan Kaur on payment of sale co....
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....ed reliefs. This court on 04.08.2015 directed the parties to maintain status quo. 4. Respondent No.1/Bank has filed a counter affidavit. It is urged that the writ petition seeks to challenge the constitutional validity of section 14 of the SARFAESI Act and this issue is no more res integra in view of the judgment of the Supreme Court in Mardia Chemicals Ltd. vs. Union of India, (2004) 4 SCC 311 which upheld the constitutional validity of the entire act except section 17(2). It is also pointed out that the property was mortgaged by late Shri Anand Kumar Chona, owner of the property with respondent No.1 as a collateral security for the credit facilities availed by M/s.S.S.Computer Galaxy, a proprietorship concern of Shri Sunit Kumar Chona by way of a registered mortgage deed. As the debt became bad, a recovery suit was instituted by respondent No.1 before this Court which was registered as CS(OS)605/1997. This was later transferred to Tis Hazari District Court. A judgment and money decree, i.e. a preliminary decree was passed by the Court of Additional District Judge on 04.08.2005 which was later on modified on 19.09.2007. A final decree was passed in favour of Respondent No.1 Bank ....
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....2014) 6 SCC 1. It is urged that in view of the said judgment of the Supreme Court the issue of notice to the petitioner was mandatory. The attempt of the Receiver to take over possession of the property without giving any opportunity to the petitioner to bringforth his case before the CMM vitiates the said order. 7. Regarding the contention of their being an alternate remedy, again reliance is placed on the judgment of the Supreme Court in the case of Harshad Govardhan Sondagar vs. International Assets Reconstruction Company Limited and Others (supra). It is averred that the order of the CMM can be challenged before this Court only. 8. Learned counsel appearing for respondents No.1 and 3 have strenuously urged that the petitioner has an alternate remedy as explained above and the present writ petition would not be maintainable. 9. We may first look at some of the relevant provisions of the statute. Section 13(4) and section 14 of the SARFAESI Act reads as follows:- "13(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 sec....
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....of the Bank as on the date of filing the application; (ii) The borrower has created security interest over various properties and that the Bank or Financial Institution is holding a valid and subsisting security interest over such properties and the claim of the Bank or Financial Institution is within the limitation period; (iii) The borrower has created security interest over various properties giving the details of properties referred to in subclause (ii) above; (iv) The borrower has committed default in repayment of the financial assistance granted aggregating the specified amount; (v) Consequent upon such default in repayment of the financial assistance the account of the borrower has been classified as a non performing asset; (vi) Affirming that the period of 60 days notice as required by the provisions of sub-section (2) of section 13, demanding payment of the defaulted financial assistance has been served on the borrower; (vii) The objection or representation in reply to the notice received from the borrower has been considered by the secured creditor and reasons for non acceptance of such objection or representation had been communicated to the borrower; (vi....
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....d assets as invalid and restore the possession of the secured assets to the borrower or restore the management of the secured assets to the borrower, as the case may be, and pass such order as it may consider appropriate and necessary in relation to any of the recourse taken by the secured creditor under sub-section (4) of section 13." 10. As per the statutory scheme after issuance of appropriate notice under Section 13 (2) of the SARFAESI Act, in case the borrower fails to discharge his liability, the secured creditor can take recourse to Section 13 (4) of the Act and take steps to recover the secured debt in any manner stated thereunder. In the present case we are concerned with Section 13(4)(a) of the SARFAESI Act inasmuch as respondent No.1 seeks to take possession of the secured asset including the right to transfer the same by way of sale. Section 17(1) provides a right of appeal to any person (including borrowers) aggrieved by any of the measures taken under Section 13(4) by the secured creditor. An application may be filed before the concerned DRT having jurisdiction. Section 17 (3) provides that the DRT if after examining the facts and circumstances of the case and the ev....
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....to impose. 4. In view of the discussion already held on this behalf, we find that the requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down. 5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the court." 12. We can now deal with the two contentions of the petitioner regarding constitutional validity of section 14 of the Act and challenge to the order of CMM dated 6.7.2015. As far as the challenge to the constitutional validity of section 14 is concerned reference may be had to the judgment of the Supreme Court in Mardia Chemicals Ltd. vs. Union of India (supra). In that case the Supreme Court was dealing with the validity of the SARFAESI Act. The Court struck down section 17(2) of the Act as ultra vires Article 14 of the Constitution of Indi....
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....who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective." 15. Similarly, reference may also be had to the judgment of the Supreme Court in the case of TRANSCORE vs. Union of India & Anr., 2008 (1) SCC 125. The Supreme Court while dealing with Section 14 and 17 of the SARFAESI Act held as follows:- "74. .....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 NPA Act refers to right of appeal. Section 17(3) states that if the DRT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under Se....
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....ion 14(1) necessarily requires the Magistrate to examine the factual correctness of the assertions made in such an affidavit but not the legal niceties of the transaction. It is only after recording of his satisfaction the Magistrate can pass appropriate orders regarding taking of possession of the secured asset. .......... 37. Thus, there will be three methods for the secured creditor to take possession of the secured assets: (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. (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 scrutinize the application as provided in Section 14, and then if satisfied, appoi....
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....relief to be granted by the DRT in an appeal under Section 17(1) of the SARFAESI Act, if successful, is (under Section 17(3)) of restoration of possession/ management of the secured asset to the borrower and to pass such order as it may consider appropriate and necessary in relation to the recourse taken by the Banks /Financial Institution under Sub-Section (4) of Section 13 of the SARFAESI Act. This relief also, we find, the DRT within whose jurisdiction the secured asset to be so restored to the borrower is situated, to be the most competent to grant and implement. The orders which the DRT under Section 17(3) of the SARFAESI Act may be required to pass may also entail exercising jurisdiction over the CMM / DM which is approached by the Bank /Financial Institution for assistance for taking over possession / management. Notice in this regard may be taken of Kanaiyalal Lalchand Sachdev Vs. State of Maharashtra; (2011) 2 SCC 782 and of United Bank of India Vs. Satyawati Tandon : (2010) 8 SCC 110 suggesting that appeal under Section 17(1) can be filed after the Bank has filed application under Section 14, even if possession / management has not been taken. In such a situation, DRT may....
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....cured asset from such a lessee. Hence, the premises was held to be outside the scope of Section 14 of the SARFAESI Act. It was in those facts that the Supreme Court concluded that where a lessee is in possession, the CMM in a petition under Section 14 will give an opportunity of hearing to the person claiming to be a lessee. 22. The facts of the present case are that the petitioner claims to be a bona fide purchaser of the property without knowledge of the prior alleged mortgage by the borrower in favour of respondent No.1. The contentions of the petitioner would necessarily have to be adjudicated upon under Section 17 of the SARFAESI Act by the DRT. It would not be for the CMM to adjudicate on the rights of the petitioner. Hence, there is no merit in the submission of the petitioner about illegality of the order of CMM dated 6.7.2015. 23. In the light of the above, we see no merits in the present petition. The petitioner has an alternative remedy which he has availed. Hence, this Writ Petition would not be maintainable [(Re: Kanaiyalal Lalchand Sachdev & Ors. v. State of Maharashtra & Ors. (supra)]. It would be open for the petitioner to raise all his objections before the DRT i....