TaxTMI 
TaxTMI 
2014 (2) TMI 1333
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.... Pradeep Kumar Gupta and another v. State of U.P. and others, AIR 2010 All. 3 respectively. 3. It may be necessary to advert to some basic facts giving rise to the question. The Orissa Rural Housing Development Corporation Limited (ORHDC) advanced loan to the petitioner-builder against mortgage of property in the year 1998. SARFAESI Act came into force on 17.12.2002 replacing the corresponding provisions of ordinance which came into force from 21.6.2002. The Act inter alia provides for enforcing of Security Interest by a Secured Creditor without the intervention of Court. The term 'Secured creditor' means a bank or 'financial institution' and other entities as defined under Section 2(zd). The financial institution is defined under Section 2(m) of the Act to mean institutions specifically described therein and any other institution which may be so specified by a notification by the Central Government. The Central Government has notified several financial institutions under the said provision from time to time, including ORHDC. ORHDC was so notified on 10.11.2003. Thereafter, ORHDC invoked provisions of Section 13 of the SARFAESI Act and issued impugned notices dat....
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....er 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). 9. In Subash Chandra Panda, the question for consideration was as follows: 8. Now the question is whether by virtue of the notification dated 10.11.2003 issued by the Central Government notifying it to be a financial institution, it can initiate such proceeding under Section 13 of the Securitization Act in respect of those two loan agreements of 2001 and 2002. 10. Dealing with the question, the Bench observed as follows: 10. From a perusal of those provisions, it appears that in order to invoke them, the opposite party must show that, 'security interest' has been created in favour of any 'secured creditor'. If it is so created it can be enforced without the intervention of the Court or Tribunal, by such creditor in accordance with the provisions of the said Act. In the said Act the expressions 'secured creditor' and 'security interest' have been defined. "Secured creditor" has been defined i....
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....erefore, the fact remains that by the time the alleged agreement was entered into between opposite party No. 6 and petitioner i.e. on 26.5.2001 and 6.5.2002, opposite party No. 6 Maharshi Housing Development Finance Corporation Ltd., was not a financial institution within the meaning of Section 2(m)(iv) of the said Act and not being a financial institution it was not a secured creditor and could not invoke the provisions of Section 13 of the Securitization Act. Nor the petitioner, was a 'borrower' under the definition of Section 2(f) on 26.5.2001 or on 6.5.2002 since a borrower means a person who has been granted financial assistance by a financial institution. Opposite party No. 6 not being a financial institution either on 26.5.2001 or on 6.5.2002 whatever loan it might have granted to the petitioner on that date was not any financial assistance given to the petitioner by a financial institution within the meaning of Section 2(m)(iv). 23. From the discussion which has been made hereinabove, it is clear that on the dates on which the alleged transactions were made between the petitioner and the opposite party No. 6, it was not a financial institution within the me....
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....unt of such borrower which is classified as non-performing asset'. 12. In Pradeep Kumar Gupta and another v. State of U.P. and others, AIR 2010 All 3, the relevant discussion is as follows: 21. The Act of 2002 was enacted with the purpose of reducing accumulated non-performing assets of the banks and financial institutions. The Act is a procedural law, which enables the banks to take possession of the property for non-payment of dues without intervention of the Court, providing for an appeal to the tribunal where possession is wrongly taken, the fact, Whether the security was created prior to the enforcement of the Act or the notification by which the banking company is noticed for applicability of the Act, will not make any difference. The Act may be divided in two parts, namely, the registration and regulation of securitization companies or reconstruction companies by the Reserve Bank of India and the facilitation of securitization of financial assets of banks and financial institutions with or without the benefit of underlying securities. The provision relating to the registration of securitization companies or reconstructions companies must be read with a retros....
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....rcing existing security interest. The Act was intended to be retrospective to include all the borrowers who were given financial assistance before the Act came into force but whose accounts became non performing. Reference has been made to definition 'borrower' under Section 2(f), default under Section 2(j), hypothecation under Section 2(n) and secured asset under Section 2(zc) to highlight that the Act referred to transactions already entered into. It has also been observed that Section 13(2) used the expression any person who makes default which can refer to the transaction already entered into in respect of which default has been made and for which action was required to be taken under the Act. It has been further observed that the Act being a procedural law has to be taken to be retrospective. Securitization was only a procedure by which pre-existing rights are enforced. Section 2(f), (m), (n), (zc) are as follows: (i) "borrower" means any person who has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial ....
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.... industrial development in the country by providing speedy procedure of recovery. Regular Courts were not able to cope with speed in adjudication of recovery cases on account of lack of infrastructure and man power. In the light of recommendations of the Tiwari Committee, special tribunals have been set up under the DRT Act for recovery of huge accumulated non-performing assets of the bank loans. In the light of the recommendations of the Narasimham Committee and Andhyarujina Committee, Securitization Act was enacted to empower barks and financial institutions to take possession of the securities and to sell them, without the intervention of the Court. Reference may be made to observations in Satyawati Tandon: 1. .......With a view to give impetus to the industrial development of the country, the Central and State Governments encouraged the banks and other financial institutions to formulate liberal policies for grant of loans and other financial facilities to those who wanted to set up new industrial units or expand the existing units. Many hundred thousand took advantage of easy financing by the banks and other financial institutions but a large number of them did not re....
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.... matters were transferred to the Tribunals from the date of their establishment. 5. An analysis of the provisions of the DRT Act shows that primary object of that Act was to facilitate creation of special machinery for speedy recovery of the dues of banks and financial institutions. This is the reason why the DRT Act not only provides for establishment of the Tribunals and the Appellate Tribunals with the jurisdiction, powers and authority to make summary adjudication of applications made by banks or financial institutions and specifies the modes of recovery of the amount determined by the Tribunal or the Appellate Tribunal but also bars the jurisdiction of all Courts except the Supreme Court and the High Courts in relation to the matters specified in Section 17. The Tribunals and the Appellate Tribunals have also been freed from the shackles of procedure contained in the Code of Civil Procedure. 6. To put it differently, the DRT Act has not only brought into existence special procedural mechanism for speedy recovery of the dues of banks and financial institutions, but also made provision for ensuring that defaulting borrowers are not able to invoke the jurisdicti....
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....ed enactment of new legislation for securitization and empowering the banks and financial institutions to take possession of the securities and sell them without intervention of the Court. 11. The Government of India accepted the recommendation of the two committees and that led to enactment of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the SARFAESI Act"), which can be termed as one of the most radical legislative measures taken by Parliament for ensuring that dues of secured creditors including banks, financial institutions are recovered from the defaulting borrowers without any obstruction. For the first time, the secured creditors have been empowered to take steps for recovery of their dues without intervention of the Courts or tribunals. 16. Thus, the Act intends to provide remedy in respect of preexisting loans. The interpretation that the Act will apply only to future debt transactions defeats the very purpose of law of reducing the non-performing assets. This object is clearly mentioned in the Statement of Objects and Reasons. As noted in the case of Satyawati Tandon amount of rupees one l....
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....hich they occur. (emphasis added) 2. Memon Abdul Karim Haji Tayab Central Cutlery Stores v. Dy. Custodian-General. AIR 1964 SC 1256. 4...... It is well settled that procedural amendments to a law apply, in the absence of anything to the contrary, retrospectively in the sense that they apply to all actions after the date they come into force even though the actions may have begun earlier or the claim on which the action may be based of an anterior date..... 3. Boucher Pierre Andre v. Supdt., Central Jail, (1975) 1 SCC 192. 2. The question which arises for determination in this petition is a narrow one and it rests on the true interpretation of Section 428. In this section confined in its application only to cases where a person is convicted after the coming into force of the new Code of Criminal Procedure, or does it also embrace cases where a person has been convicted before but his sentence is still running at the date when the new Code of Criminal Procedure came into force? It is only if the latter interpretation is accepted that the petitioner would be entitled to claim the benefit of the section and hence it becomes necessary to arri....
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....ction does not offend against the principle which requires that unless the legislative intent is clear and compulsive, no retrospective operation should be given to a statute. On this interpretation, the section is not given any retrospective effect. It does not seek to set at naught the conviction already recorded against the accused person. The conviction recorded against the accused person. The conviction remains intact and unaffected and so does the sentence already undergone. It is only the sentence, insofar as it yet remains to be undergone, that is, reduced. The section operates prospectively on the sentence which yet remains to be served and curtails it be setting off the period of detention undergone by the accused person during the investigation, inquiry or trial of the case. Any argument based on the objection against giving retrospective operation is, therefore, irrelevant. 4. New India Insurance Co. Ltd. v. Shanti Misra, (1975) 2 SCC 840. 5. On the plain language of Sections 110-A and 110-F there should be no difficulty in taking the view that the change in law was merely a change of forum i.e. a change of adjectival or procedural law and not of subst....
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.... to have retrospective effect, a statute concerned mainly with matters of procedure or evidence or which is declaratory in nature has to be construed as retrospective unless there is a clear indication that such was not the intention of the legislature..... 7. ESI Corpn. v. Dwaraka Nath Bhargwa, (1997) 7 SCC 131. The Employees' State Insurance Corporation has brought in challenge the order passed by the Allahabad High Court disposing of the first appeal from Order No. 362 of 1972. By the impugned judgment, the High Court has taken the view that provisions of Section 45-B of the Employees' State insurance Act, 1948 (hereinafter referred to as "the Act") enabling recovery of contribution payable under the Act as arrears of land revenue cannot be pressed into service by the appellant-Corporation in the present case. Reason given by the High Court for the said conclusion is to the effect that the recoveries pertain to the period prior to the date on which Section 45-B was inserted in the statute-book. The said section was brought into force on 28.1.1968, while the amount sought to be recovered became payable on 27.1.1967 and 24.1.1968. It is of course true tha....
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....ince prior to the coming into force of Section 45-B and have throughout also remained unpaid. 8. Shyam Sunder v. Ram Kumar. (2001) 8 SCC 24. 22. In Maxwell on the Interpretation of Statutes, 12th Edn., the statement of law in this regard is stated thus: Perhaps no rule of construction is more firmly established than thus - 'that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matters of procedure, unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either Interpretation, it ought to be construed as prospective only'. The rule has, in fact, two aspects, for it, 'involves another and subordinate rule, to the effect that a statute is not to be construed so as to have greater retrospective operation than its language renders necessary'. 23. In Francis Bennion's Statutory Interpretation, 2nd Edn., the statement of law is stated as follows: The essential idea of a legal system is that current law should govern current, activities. ....
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....ard to an intention so expressed, and the Court of appeal may give effect to such a law even after the judgment of the Court of first instance. (emphasis added) 9. Dilip v. Mohd Azizul Haq, (2000) 3 SCC 607: 9. The problem concerning retrospectivity concerning enactments depends on events occurring over a period. If the enactment comes into force during a period it only operates on those events occurring then. We must bear in mind that the presumption against retrospective legislation does not necessarily apply to an enactment merely because a part of the requisites for its action is drawn from time antecedent to its passing. The fact that as from a future date tax is charged on a source of income which has been arranged or provided for before the date of the imposition of the tax does not mean that a tax is retrospectively imposed as held in Commrs. of Customs and Excise v. Thorn Electrical Industries Ltd., 1975 1 WLR 1661. (emphasis added) 10. Zile Singh v. State of Haryana, (2004) 8 SCC 1. 13. It is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implic....
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....an be clearly and doubtlessly spelt out, the inhibition contained in the rule against perpetuity becomes of doubtful applicability as the "inhibition of the rule" is a matter of degree which would "vary secundum materiam" (p. 226). Sometimes, where the sense of the statute demands it or where there has been an obvious mistake in drafting, a Court will be prepared to substitute another word or phrase for that which actually appears in the text of the Act (p. 231). 20. In Bengal Immunity Co. Ltd. v. State of Bihar, AIR 1955 SC 661, Heydon case 76 ER 637 was cited with approval. Their Lordships have said: (SCR pp. 632-33) It is sound rule of construction of a statute firmly established in England as far back as 1584 when Heydon case was decided that- .....for the sure and true interpretation of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) four things are to be discerned and considered- st. What was the common law before the making of the Act. nd. What was the mischief and defect for which the common law did not provide. rd. What remedy Parliament hath resolved and appointed to cu....
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....d in several decisions of this Court as well as English Courts is that all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an existing right or crate a new liability or obligation unless that effect cannot be avoided without doing violence to the language of the enactment, if the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed as prospective only. 14. Gurbachan Singh v. Satpal Singh (1990) 1 SCC 445. 37. The provisions of the said section do not create any new offence and as such it does not create any substantial right but it is merely a matter of procedure of evidence and as such it is retrospective and will be applicable to this case. It is profitable to refer in this connection to Halsbury's Laws of England, Fourth Edition, Volume 44 page 570 wherein it has been stated that: The general rule is that all statutes, other than those which are merely declaratory or which relate only to matters of procedu....