TaxTMI 
TaxTMI 
2019 (1) TMI 827
X X X X Extracts X X X X
X X X X Extracts X X X X
....Respondent : Mr. B.B. Bagga, Advocate, Mr. Anandeshwar Gautum, Advocate and Mr. Gaurav Goel, Advocate, Mr. Puneet Jain, Advocate for Mr. Rakesh Gupta, Advocate for respondent-SBI, Mr. Sumit Batra, Advocate, Ms. Geeta Sharma, Advocate, Mr. Amit Kumar Goyal, Advocate, Mr. Amit Sharma, Advocate for Mr. Prateek Mahajan, Advocate, Mr. Harsh Chopra, Advocate, Mr. Vinod Saini,Senior Panel, Mr. D.K. Singal, Advocate, Ms. Sona Kaur, Advocate, Mr. Lalit Thakur, Advocate for Mr. V.K. Sachdeva, Advocate, Mr. Sandeep Suri, Advocate for the respondent, Mr. Nakul Sharma, Advocate And Ms. Puja Chopra, Advocate, Ms. Ishneet Kaur, AAG, Punjab And Mr. Ayuwan Singh, AAG, Haryana ORDER Ajay Kumar Mittal, J. 1. This order shall dispose of a bunch of 58 petitions i.e. CWP Nos. 9824, 19807 of 2017, 19318, 813, 2222, 6370, 7525, 7595, 4357, 23104, 22197, 23194, 23286, 9610, 20243, 20999, 20834, 21249, 20126, 9625, 21575, 21663, 20131, 18779, 22659, 16351, 17661, 8753, 18508, 17948, 16057, 15036, 10802, 19757, 19856, 20859, 20025, 17283, 10457, 19855, 18320, 18720, 17674, 18894, 17956, 17520, 15354, 12485, 11569, 10548, 9681, 9253, 23932, 23935, 24504, 27370, 22476 and 9285 of 2018, as according to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oached the DRT, Chandigarh by filing SA No. 150 of 2015 which was later on renumbered as SA No.525 of 2017. During the pendency of the SA, the Bank made attempt to sell certain properties for which applications were filed before the Tribunal challenging the same. The Bank had put the property to sale on various occasions including by virtue of sale notices dated 5.6.2015 and 25.7.2015. In the meantime, on 20.11.2015, the Bank had formulated one time settlement scheme, pursuant to which on 30.12.2015, the petitioners submitted proposal for settlement of the loan account vide letter dated 11.1.2016. The Bank accepted the offer for Rs, 101.27 lacs and upfront money of Rs, 10 lacs came to be adjusted. To the utter surprise of the petitioners, the Bank had taken illegal physical possession of the factory unit on 11.1.2016 at 11 AM. By 12 noon, the Director of the Company along with his son went to the bank and reached there at 1:30:26 PM on 11.1.2016. While the settlement letter was given to them and on the other hand behind their back, physical possession of the running factory was taken through enforcement agency. The petitioners filed application before DRT seeking restoration of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fter execution of an order under section 14 of the 2002 Act. Hence the instant petitions before this Court by the petitioners. 4. We have heard learned counsel for the parties. 5. Learned counsel for the petitioners contended that Section 17 of the 2002 Act cannot be interpreted to mean that it can be invoked only when symbolic or physical possession of the asset is taken from the borrower by the Bank. Reliance was placed on following judgments:- I) M/s Hindon Forge Pvt. Limited and another vs. The State of Uttar Pradesh through District Magistrate, Ghaziabad and another, Civil Appeal No.10873 of 2018, decided on 1.11.2018. II) Mardia Chemicals Limited etc. vs. Union of India and others, (2004) 4 SCC 311; III) M/s Transcore vs. Union of India and others, (2008) 1 SCC 125; IV) Authorised Officer, Indian Overseas Bank and another vs. M/s Ashok Saw Mill, (2009) 8 SCC 366; V) Kaniyalal Lalchand Sachdev and others vs. state of Maharashtra and others, (2011) 2 SCC 782; VI) Standard Chartered Bank vs. V. Noble Kumar and others, (2013) 9 SCC 620; VII) State Bank of Patiala vs. Mukesh Jain and another, (2017) 1 SCC 53; VIII) M/s Punjab Chemical Industries vs. Distric....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... document or arrangement under which security interest is created in favour of the secured creditor including the creation of mortgage by deposit of title deeds with the secured creditor; Section 13 relates to enforcement of security interest whereas Section 14 deals with power of Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset. Section 15 provides for manner and effect of takeover of management. Under Section 17, an application against measures to recover secured debts lies to the DRT. Section 17A deals with making of application to Court of District Judge in certain cases. 9. The 2002 Act was enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and to provide for a central database of security interests created on property rights and for matters connected therewith or incidental thereto. According to the definition of "default", it means non-payment of any principal debt or interest or any other amount payable by the borrower to the secured creditor consequent upon which the account is classified as non-performing asset in the books of account of the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e borrower and transfer the same by way of lease, assignment or sale for realising the secured assets. This is subject to the condition that the right to transfer by way of lease, etc. shall be exercised only where substantial part of the business of the borrower is held as secured debt. If the management of whole or part of the business is severable, then the secured creditor can take over management only of such business of the borrower which is relatable to security. The secured creditor can appoint any person to manage the secured asset, the possession of which has been taken over. The secured creditor can also, by notice in writing, call upon a person who has acquired any of the secured assets from the borrower to pay the money, which may be sufficient to discharge the liability of the borrower. According to Sub-section (7) of Section 13, where any action has been taken against a borrower under sub-section (4), all costs, charges and expenses properly incurred by the secured creditor or any expenses incidental thereto can be recovered from the borrower. The money which is received by the secured creditor is required to be held by him in trust and applied, in the first instance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the same to the secured creditor. Section 15 of the Act deals with manner and effect of take over of management. 11. Section 17 of the 2002 Act has been amended w.e.f 1.9.2016. The words "Application against measures to recover secured debts" are substituted in place of the words "Right to appeal". This section speaks of the remedies available to any person including borrower who may have grievance against the action taken by the secured creditor under sub-section (4) of Section 13. Such an aggrieved person can make an application to the Tribunal within 45 days from the date on which action is taken under that sub-section. By way of abundant caution, an Explanation has been added to Section 17(1) and it has been clarified that the communication of reasons to the borrower in terms of Section 13(3-A) shall not constitute a ground for filing application under Section 17(1). Sub-section (2) of Section 17 casts a duty on the Tribunal to consider whether the measures taken by the secured creditor for enforcement of security interest are in accordance with the provisions of the Act and the Rules made thereunder. If the Tribunal, after examining the facts and circumstances of the case and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ken by banks/financial institutions in exercise of their powers under Section 13(4) of the Act read with Rule 8 of 2002 Rules. After discussing various provisions of the 2002 Act, the Rules and the judgments of the Supreme Court, the Full Bench came to the conclusion that taking symbolic possession or issuance of possession notice under Appendix IV of the Rules, meeting with any resistance, cannot be treated as measure/s taken under Section 13(4) of the 2002 Act and therefore, the borrower at that stage cannot file an application under Section 17(1) before the DRT. In other words, a securitization application under Section 17(1) of the 2002 Act is maintainable only when actual/physical possession is taken by the secured creditor or the borrower loses actual/physical possession of the secured assets. Further, once the right to approach DRT matures and securitization application under Section 17(1) is filed by the borrower, it is open to the DRT to deal with the same on merits and pass appropriate orders in accordance with law. 15. It would be apposite to refer to various decisions relied upon by the Apex Court in M/s Hindon Forge Pvt. Limited's case (supra). The Apex Court referred....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vail of any of the remedies under section 13(4), and can approach the Magistrate straightaway after the 60-day period of the notice under section 13(2) is over, under section 14 of the Act. This Court therefore held: "35. Therefore, there is no justification for the conclusion that the Receiver appointed by the Magistrate is also required to follow Rule 8 of the Security Interest (Enforcement) Rules, 2002. The procedure to be followed by the Receiver is otherwise regulated by law. Rule 8 provides for the procedure to be followed by a secured creditor taking possession of the secured asset without the intervention of the court. Such a process wasunknown prior to the SARFAESI Act. So, specific provision is made under Rule 8 to ensure transparency in taking such possession. We do not see any conflict between different procedures prescribed by law for taking possession of the secured asset. The finding of the High Court in our view is unsustainable. 36. Thus, there will be three methods for the secured creditor to take possession of the secured assets: 36.1. (i) The first method would be where the secured creditor gives the requisite notice under Rule 8(1) and where he does no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....observation made in paragraph 36.1.(i), which is strongly relied upon by the Full Bench of the High Court, to arrive at the conclusion that actual physical possession must first be taken before the remedy under section 17(1) can be availed of by the borrower, does not flow from this decision at all." In Canara Bank vs. M.Amarender Reddy and another, (2017) 4 SCC 735, after referring to the decision in Mathew Varghese vs. M.Amritha Kumar and others, (2014) 5 SCC 610, it was held that possession may be taken over under rule 8 either symbolically or physically making it clear that two separate modes for taking possession are provided for under rule 8 of the Rules. In ITC Limited's case (supra), it was concluded by the Apex Court that a secured creditor remains a secured creditor even after possession is taken over as the fiction contained in Section 13(6) of the 2002 Act does not convert the secured creditor into the owner of the asset but merely vests complete title in the transferee of the asset once transfer takes place in accordance with Rules 8 and 9 of the 2002 Rules. 17. After discussing the relevant judgments and provisions of the 2002 Act, the Supreme Court came to the conc....