TaxTMI 
TaxTMI 
2011 (9) TMI 1150
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....properties in favour of respondent State Bank of India which provided financial assistance to petitioner No. 1 for establishing an automatic rice milling plant. The respondent Bank initiated recovery proceedings against the petitioner under the provisions of the SARFAESI Act vide demand notice dated 5th May, 2009. On receiving the demand notice the petitioners submitted a detailed representation on 8th July, 2009 to the Bank which was decided vide order dated 16th July, 2009 and demand was modified. On 17th July, 2009, the petitioners submitted another representation which was decided by the Bank vide order dated 21st August, 2009. The Bank then took the possession of the mortgaged properties on 30th April, 2010 by taking recourse to one of the measures enumerated in Section 13(4) of the SARFAESI Act. 2. Aggrieved with the action taken, the petitioners filed SA No. 87/2010 under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal, Jabalpur (in short "the Tribunal"). They also separately filed an application for staying the auction of the mortgaged properties which was scheduled for 29th July, 2010 but it was dismissed by the Tribunal vide order dated 28th July, 201....
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....n the other hand have supported the order passed by the Appellate Tribunal by relying upon the decision of Supreme Court in Fairgrowth Investments Limited v. Custodian, IV (2004) CLT 156 (SC) = VI (2004) SLT 376 = (2004) 11 SCC 472. 5. It is to be noted that the Appellate Tribunal in its decisions rendered in Misuki Exports Put. Ltd. v. State Bank of India (supra), while holding that it has no power to condone the delay, has relied upon the decisions of the Supreme Court in Hukumdev Narain Yadav v. Lalit Narain Mishra, AIR 1974 SC 480 and Fairgrowth Investments Limited (supra). 6. Section 13 of the SARFAESI Act contains detailed mechanism for enforcement of security interest. Sub-section (1) thereof empowers the secured creditors to enforce the security interest without the intervention of the Court or Tribunal notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act. Sub-section (2) enables the secured creditor to call upon the borrower by notice in writing to discharge in full his liabilities within sixty days from the date of notice with an indication that if he fails to do so, the secured creditor shall be entitled to exercise all o....
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....s Act, 1993 (51 of 1993) or any other law for the time being in force. 8. Section 18 of the SARFAESI Act, with which I am mainly concerned, reads as under: 18. Appeal to Appellate Tribunal --(1) Any person aggrieved, by any order made by the Debts Recovery Tribunal under Section 17, may prefer an Appeal along with such fee, as may be prescribed to an Appellate Tribunal within thirty days from the date of receipt of the order of Debts Recovery Tribunal: Provided that different fees may be prescribed for filing an Appeal by the borrower or by the person other than the borrower: Provided further that no Appeal shall be entertained unless the borrower has deposited with the Appellate Tribunal fifty per cent, of the amount of debt due from him, as claimed by the secured creditors or determined by the Debts Recovery Tribunal, whichever is less: Provided also that the Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not less than twenty-five per cent, of debt referred to in the second proviso. (2) Save as otherwise provided in this Act, the appellate Tribunal shall, as far as may be, dispose of the Appeal in ....
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....mplication" and even in a case where the special law does not exclude the provisions of Section 4 to Section 24 of the Limitation Act by an express reference, it would nonetheless be open to the Court to examine whether and to what extent nature of those provisions are excluded or the nature of the subject-matter and scheme of the special law exclude their operation. 12. Section 18(2) of the SARFAESI Act provides that the appellate Tribunal shall, as far as may be, dispose of the Appeal in accordance with the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (in short, "the RDDBFI Act") and Rules made thereunder. 13. RDDBFI Act was enacted earlier in the year 1993 because Banks and Financial Institutions were experiencing considerable difficulties in recovering loans and enforcement of securities charged with them. This Act provided for the establishment of Tribunals and Appellate Tribunals for expeditious adjudication and recovery of debts due to Banks and Financial Institutions with provisions to ensure that defaulting borrowers were not able to invoke the jurisdiction of Civil Court for frustrating the proceedings initiated by the Banks ....
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....d the suggestions and that led to enactment of the SARFAESI Act in the year 2002 by which for the first time the secured creditors have been empowered to take steps for recovery of their dues, without intervention of the Court or Tribunals [see United Bank of India v. Satyawati Tondon, (2010) BC 495 (SC) = VI (2010) SLT 52 = AIR 2010 SC 3413]. 15. When I compare Section 18 of the SARFAESI Act with Section 20 of the RDDBFI Act, I find that in Section 18 not only the period of limitation for filing an Appeal has been reduced to 30 days from 45 days as provided in Section 20 but the power of the Appellate Tribunal to condone delay has also been excluded which is provided in Section 20 of the RDDBFI Act. This itself leaves no iota of doubt that the Legislature has consciously intended not to confer the power of condonation of delay with the Appellate Tribunal under Section 18 of the SARFAESI Act. Because, it is a well-settled principle of law that just as use of same language in a later statute as was used in an earlier one in pari materia is suggestive of the intention of the Legislature that the language so used in the later statute used in the same sense as in the earlier one, ch....
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....r quick resolution of dispute arising out of the action taken for recovery of such dues, I have no hesitation in holding that the Legislature has consciously excluded the applicability of the provisions of Section 4 to Section 24 of the Limitation Act insofar as they relate to Section 18 of the SARFAESI Act. The decisions of UCO Bank v. Kanji Manji Kothari and Punnu Swami v. The Debts Recovery Tribunal of Bombay and Madras High Courts, relied upon by the learned Counsel for petitioner are with regard to the applicability of Section 5 of the Limitation Act only to Section 17 of the SARFAESI Act and not Section 18. In both these decisions, Section 18 has not even been referred. The decisions are, therefore, not applicable in the present case. 18. For these reasons, I conclude that the appellate Tribunal has no power to condone the delay in filing of Appeal before it under Section 18 of the SARFAESI Act and answer the question in negative. 19. Since, (sic) Appeal before the appellate Tribunal was filed admittedly after the expiry of the prescribed period of 30 days the same has rightly been dismissed. 20. The Petition has no merit. It fails and is dismissed but without any or....
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.... creditor, such reply to the notice must be considered with due application of mind and the reasons for non-accepting the objections, however, brief they may be, must be communicated to the borrowers. The reasons so communicated shall only be for the purpose of the information/knowledge of the borrower without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act, at that stage. 26. To ensure effective implementation of the judgment in Mardia Chemicals (supra), and also to discourage the borrowers to postpone the repayment of their dues and also enable the secured creditor to speedily recover their debts, if required, by enforcement of security or other measures specified in Sub-section (4) of Section 13 of the Act of 2002 the Central Government promulgated the enforcement of Security Interest and Recovery of Debts Loans (Amendment) Ordinance, 2004 on 11th November, 2004. The same was later on enacted on 29th December, 2004 after it was passed by Lok Sabha on 7th December, 2004 and Rajya Sabha on 16th December, 2004; whereby besides amending Sections 2, 3, 4, 7, 13, 15, 17, 18, 25, 28, 31 and 38, inserted Sections 5-A, 12-A, 13 (3-A), 17-A,....
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.... creditor depends on possession of the asset (pledge/lien). The third is charge where the creditor neither obtains ownership nor possession of the asset but the asset is appropriated to the satisfaction of the debt or obligation in question (charge). The dichotomy, which is of importance, is that more than one obligation could arise on the same transaction, namely, to repay the debt or to discharge some other obligation. 63. Therefore, when Section 13(4) talks about taking possession of the secured assets or management of the business of the borrower, it is because a right is created by the borrower in favour of the Bank/FI when he takes a loan secured by pledge, hypothecation, mortgage or charge. For example, when a company takes a loan and pledges it financial asset, it is the duty of that Company to see that the margin between what the company borrows and the extent to which the loan is covered by the value of the financial asset hypothecated is retained. If the borrower company does not repay, becomes a defaulter and does not keep up the value of the financial asset which depletes then the borrower fails in its obligation which results in a mismatch between the asset and the....
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....atory aspect was because the Tribunal substituted the regular Civil Court (Courts of Original Jurisdiction). Sub-section (1) of Section 17 of the Act of 1993 stipulates that: (1) Any person (including borrower), aggrieved by any of the measures referred to in Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer under this Chapter, 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 measures had been taken: Provided that different fees may be prescribed for making the application by the borrower and the person other than the borrower. Sub-section (2) of Section 17 stipulates: (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. 29. Thus, the entire machinery to adjudicate matter pertaining to debts due to Banks and Financial Institutions and for matters connected therewith or incidental thereto....
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....the cumulative remedies. The object behind Section 13 of the SARFAESI Act, 2002 and Section 17 read with Section 19 of the RDDBFI Act is the same, namely, recovery of debt. Conceptually, there is no inherent or implied inconsistency between the two remedies. Therefore, as stated above, the Object behind the enactment of the SARFAESI Act, 2002 is to accelerate the process of recovery of debt and to remove deficiencies/obstacles in the way of realisation of debt under the RDDBFI Act by the enactment of the SARFAESI Act, 2002. 66. We have already analysed the scheme of both the Acts. Basically, the SARPAESI Act, 2002 is enacted to enforce the interest in the financial assets which belongs to the Bank/FI by virtue of the contract between the parties or by operation of common law principles or by law. The very object of Section 13 of SARFAESI Act, 2002 is recovery by non-adjudicatory process. A secured asset under SARFAESI Act, 2002 is an asset in which interest is created by the borrower in favour of the Bank/ FI and on that basis alone the SARFAESI Act, 2002 seeks to enforce the security interest by non-adjudicatory process. Essentially, the SARFAESI Act, 2002 deals with the rights....
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....eals with the provisions regarding the manner of enforcement of security interest. Sub-section (4) of Section 13 empowers the secured creditor (Section 2(1)(zd) "to take recourse to one or more of the measures to recover secured debt (Section 2(1)(ze)", in case, borrower, which includes the guarantor as per Section 2(1)(fl), fails to discharge his liability in full within the period specified in Sub-section (2) of Section 13. It is against the measures provided under Sub-section (4) of Section 13 an Appeal is provided under Section 17. Under Section 17 the Tribunal is required to decide the Appeal within an outer time limit of four months as provided under Sub-section (5) of Section 17. 35. It is pertinent to note that Sub-section (1) of Section 17 lays down the period within which an application can be filed against the measures referred under Sub-section (4) of Section 13 taken by the secured creditor or his authorised officer, which is "within forty-five days from the date on which such measures had been taken". 36. It is to be noted that the law makers have not wielded even the Tribunal with a power to condone the delay if any in case the application is not filed within f....
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....39; is construed in a manner to negative the functions permitted to be performed under Sub-clause (b), the very object with which Sub-clause (b) has been enacted will be frustrated. We, have, therefore, to construe the expression, 'save as otherwise provided by or under the Act' in a harmonious manner so that Sub-clause (b) is not reduced to a nullity. In our opinion the expression 'save as otherwise provided by or under the Act' would in the context mean, 'save as otherwise expressly barred by or under the Act'. If there is provisions which expressly debars the exercise of the power under Sub-clause (b) in any case then only the State Transport Authority will not be able to exercise the power and discharge the functions given in Sub-clause (b). Otherwise there would be no such bar. It is not shown to us that there is any express provision which bars the performance by the State Transport Authority of the duties referred to in Sub-clause (b) and, therefore we are of the view that the State Transport Authority in this particular case would not be barred from performing the duties under Sub-clause (b). 37. What the petitioner wants that the provisions of th....