TaxTMI 
TaxTMI 
2021 (3) TMI 566
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....overnmental agencies/undertakings such as the appellant-bank, a nationalised bank before us, to engage in such frivolous, vexatious and impractical litigation demonstrates the gross indifference of the administration towards litigative diligence. 2. The present litigation initiated by the appellant-bank, right from the inception has resulted only in loss of the time of the various judicial forums that have been approached by the appellant-bank and is also a drain on the public exchequer. What perplexes us most, is that in such financial matters, the objective is quick recovery and lowering the possibility of losses. However, by engaging in the present litigation, the attitude adopted by the appellant-bank and its officers has borne results that are against the interests of the bank and a matter that could have been laid to rest by rational thinking has been unnecessarily dragged for 3 years. When such litigation reaches our doorsteps, we feel exasperated by the inaction or rather the wrongful action and by the policy of blindly engaging in litigation before various judicial forums as entities such as the appellant-bank before us are expected to exercise finer sense and sensibili....
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....ritisation application registered as Securitisation Application Nos. 47 and 48 of 2015 under section 17 of the SARFAESI Act assailing the notice under section 13(2), (4) and the action taken under section 14 on various grounds. These applications were responded by the secured creditor and pleadings were exchanged. 7. The Debts Recovery Tribunal vide judgment and order dated June 22, 2017 set aside the demand notice under section 13(2) of the SARFAESI Act and all consequential proceedings and further directed the secured creditor to restore the possession with the liberty to proceed afresh in accordance to law. The finding of the Tribunal was that the notice was not in accordance with the statutory provision provided in section 13(3) of the SARFAESI Act as it did not contain the details of the amount due and also the correct details of the secured assets. It would be worthwhile to quote paragraphs 9 and 17 to 19 of the Tribunal's judgment which read as follows : "9. The respondent-bank issued demand notice dated December 29, 2014 under section 13(2) of the SARFAESI Act, 2002 for an amount of Rs. 6,44,18,748 outstanding in cash credit limit, an amount of Rs. 36,12,391....
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....d amount out standing as on date mentioned in the demand notice. In the present case, the Authorized Officer has given only amount sanctioned and payable by the borrower. He has not provided rate of interest at which the amount has been claimed prior to December 1, 2014. The respondent-bank has charged penal interest and capitalized the same time and again on monthly basis. The Authorized Officer was having opportunity to explain the details while deciding objection of the applicant and to assure applicants that amount inflated due to compounding penal interest will be excluded. But he has failed to avail opportunity to justify his action on the objection raised by the applicant. The details of secured asset are not as per mortgage deed No. 489, dated February 7, 2013. Therefore, the Authorized Officer has failed to comply mandatory provision of section 13(3) of the SARFAESI Act 2002. Therefore, demand notice dated December 29, 2014 is not sustainable at law and same is hereby quashed and set aside. 18. Since demand notice has been set aside as above, further action of the respondent-bank consequent upon demand notice dated December 29, 2014 is also quashed and set aside. ....
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.... contempt proceedings before the Debts Recovery Tribunal would remain stayed. 10. The Debts Recovery Appellate Tribunal, Mumbai, vide judgment and order dated August 23, 2019 dismissed both the appeals of the secured creditor. The findings recorded by the Appellate Tribunal and the observations made are recorded in paragraph 4 of the judgment in Appeal No. 130 of 2017. It is relevant to state here that similar observations are recorded in paragraph 4 of the judgment in Appeal No. 131 of 2017. The Appellate Tribunal made observations against the bank in paragraph 4 of its judgments, as such, the same is reproduced below : "4. When the Tribunal below specifically recorded a finding that bank has not followed section 13(3) of the SARFAESI Act, the Legal Department of the Bank, before recommending to file appeal, should have examined the notice dated December 29, 2014 with reference to provisions of the SARFAESI Act. If the appellant has issued a fresh 13(2) notice immediately after the disposal of the S. A. rectifying the mistake, by this time other steps could have been completed and the bank might have realized money by this time." 11. Aggrieved by the judgment of the....
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....ention one single figure of the total outstanding amount without giving any break up or details of the amount payable in the form of the principal amount outstanding, interest payable on it for different periods whether at flat or floating rates, any penal interest, the amount of costs, etc., or any other amount under any other head which would be chargeable from the borrowers. Even with respect to the details of the secured assets, the secured creditor did not care or deem it proper to correct it. 15. The Debts Recovery Tribunal, the Debts Recovery Appellate Tribunal and the learned single judge of this court concurrently and consistently based upon bare perusal of section 13(3) of the SARFAESI Act as also the law on the point held against the secured creditor. The secured creditor instead of correcting its mistake as had been pointed out by the Tribunal, the Appellate Tribunal and the learned single judge, has now filed the present appeals and has sought to canvass that it was not necessary for the secured creditor to provide the breakup of the outstanding amount and mention of one single figure would be due compliance of the provisions under section 13(3) of the SARFAESI Act.....
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....ii) Kaniyalal Lalchand Sachdev v. State of Maharashtra reported in [2011] 162 Comp Cas 337 (SC) ; [2011] 2 SCC 782. With reference to various case laws detailed hereinabove, having gone through each of them we may say with respect that they have no application in the facts and circumstances of the present case and the legal issues relevant for the present proceedings. 19. Mr. Parikh in his written submission has also referred to in detail regarding the one-time settlement offered, the possession having been taken by the secured creditor after the order under section 14 of the SARFAESI Act was passed, thereafter the borrowers having re-entered into possession and thereby committing contempt for which separate proceedings were being initiated and about the ownership of one of the properties mortgaged. In our considered opinion, all these facts are not relevant for deciding the present controversy and they pale into insignificance and become irrelevant once the Debts Recovery Tribunal's order for setting aside the notice under section 13(2) of the SARFAESI Act and further directing the secured creditor to restore the possession of the property to the borrowers having remaine....
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....f the SARFAESI Act and secondly whether the Debts Recovery Tribunal under section 17 of the SARFAESI Act could test the validity of notice under section 13(2) of the SARFAESI Act. First point : Details to be mentioned (section 13(3)) 25. The notice dated December 29, 2014 under section 13(2) issued by the appellant-bank is reproduced below : "Dated : December 29, 2014 By Regd. AD To, 1. M/s. Mithilanchal Industries P. Ltd., Plot No. 503, Road No. 4, GIDC, Sachin, Surat-394 230. 2. M/s. Mithilanchal Industries P. Ltd., Plot No. 7311/1, Road No. 75B, GIDC, Sachin, Surat-394 230. 3. M/s. Mithilanchal Industries P. Ltd., 2nd Floor, Plot No. C-46/47, City Industrial Estate, Near Swaminarayan Temple, Udhna, Surat-394 510. Dear Sir, Notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). Reg : Credit facilities availed by M/s. Mithilanchal Industries P. Ltd. our branch office : Surat-Main. You, M/s. Mithilanchal Industries P. Ltd., has availed the following credit facilities. Sl. No. Facility Limit (Rs. in lakhs) Balance O/s as on 30-11-....
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....nt of secured debt by you are as under : 1. Hypothecation of stocks and book debts and entire current assets of company. 2. Factory Land and Building situated at Plot No. 7311/1, Near Road No. 8 and 73/B, GIDC, Sachin, Surat (owned by M/s. Telstar Enterprise). 3. Flat No. 5B/502, Brij Ratan Apartment, Near Hotel Gateway, Parle Point, Surat (owned by Shri Vivekanand D. Jha and Smt. Vibha Vivekanand Jha). Please take notice that in terms of section 13(13) of the said Act, you shall not, after receipt of this notice, transfer by way of sale, lease or otherwise (other than in the ordinary course of business) any of the secured assets above referred to, without prior written consent of the bank. You are also put on notice that any contravention of this statutory injunction/restraint, as provided under the said Act, is an offence. If for any reason, the secured assets are sold or leased out in the ordinary course of business, the sale proceeds or income realized shall be deposited/remitted with/to the bank. You will have to render proper account of such realization/income. *We reserve our rights to enforce other secured assets ....
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....I Act has to necessarily contain the details on the above two counts. 29. In so far as the first part is concerned, i. e., regarding the amount payable by the borrowers, if the intention of the Legislature was only to provide the total outstanding amount or the aggregate amount outstanding and payable by the borrowers, the language would have been different. It would not have been necessary to incorporate sub-section (3) in section 13 of the SARFAESI Act. In sub-section (2) of section 13 of the SARFAESI Act, it is also mentioned that the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor. The said liabilities would be mentioned in view of the provisions of sub- section (2) itself. But, consciously, sub-section (3) was incorporated so as to ensure that the details of the amount payable are provided in the notice. Such details would include the relevant calculations made by the bank under different heads which had become due and payable at the end of the borrower. 30. There is another reason for incorporating sub-section (3). Sub-section (3A) gives right to the borrower to make a representation or raise an....
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....ferred to in sub-section (4) of section 13 taken by the secured creditor are not in accordance with the provisions of the Act and the rules, and require restoration of the management of the business or restoration of possession of the secured assets to the borrower, it may declare such action as invalid and restore possession of the secured assets to the borrower or restore the management of the business to the borrower, as the case may be. As a necessary corollary, sub-section (4) of section 17 provides that if the Tribunal declares that the recourse taken by the secured creditor under sub-section (4) of section 13 was in accordance with the provisions of the Act and the rules made thereunder, then, notwithstanding anything contained in the Act or any other law for the time being in force, the secured creditor shall be entitled to take recourse to one or more of the measures specified under sub-section (4) of section 13 to recover his secured debt. 34. On a plain reading of section 17, it is seen that the Tribunal has wide powers to restore possession in favour of the borrower, if such action taken under sub-section (4) of section 13 is declared invalid. Even where the property....
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....hat the borrower is already under a liability and further that, his account in the books of the bank or FI is classified as substandard, doubtful or loss. The NPA Act comes into force only when both these conditions are satisfied. Section 13(2) proceeds on the basis that the debt has become due. It proceeds on the basis that the account of the borrower in the books of bank/FI, which is an asset of the bank/FI, has become non-performing. Therefore, there is no scope of any dispute regarding the liability . . . There is a difference between accrual of liability, determination of liability and liquidation of liability . . . The point to be noted is that the scheme of the NPA Act does not deal with the disputes between the secured creditors and the borrower. On the contrary, the NPA Act deals with the rights of the secured creditors inter se. The reason is that the NPA Act proceeds on the basis that the liability of the borrower has crystallized and that his account is classified as non-performing asset in the hands of the bank/FI . . . However, under section 17(2), the DRT is required to consider whether any of the measures referred to in section 13(4) taken by the s....
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....ntract between the parties. Needless to say that all such grounds, which render the action of the bank/financial institutions illegal can be raised in the proceedings under section 17 of the Act before the Debts Recovery Tribunal. The learned Additional Solicitor General and learned counsel appearing for banks and financial institutions fairly stated that all the objections which can be legally raised in the reply to the notice under section 13(2) of the Act can also be raised in the proceedings under section 17(1) of the Act. It would be for the Debts Recovery Tribunal to decide in each case whether the action of the bank is in accordance with the provisions of the Act and is legally sustainable." 37. As can be seen from the Statement of Objects and Reasons of the Securitisation Act, the main purpose of the Securitisation Act, and in particular section 13 thereof, is to enable and empower the secured creditors to take possession of their securities and to deal with them without the intervention of the court. Therefore, in an application under section 17, the Tribunal is concerned only with the validity of the acts of the secured creditor in taking possession of the sec....
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....ity of the notice under section 13(2) and also the procedure prescribed under sub-section (3A) of section 13 of the SARFAESI Act as canvassed by learned counsel for the appellant secured creditor. 40. A reading of section 13(4) of the SARFAESI Act gives power to the secured creditor to take recourse to one or more of the measures provided in clauses (a) to (d) to recover his secured debt only where the borrower fails to discharge his liability in full within the period specified in sub-section (2) thereof. Thus, there has to be a failure on the part of the borrower to comply with the terms mentioned in sub-section (2). Failure to comply with sub-section (2) would entail a prior duty/obligation on the part of the secured creditor to strictly comply with the terms mentioned therein, that is a valid notice. The notice would be valid only upon complying with the conditions of sub-section (3). Once the action taken at the stage of section 13(4) of the SARFAESI Act is questioned under section 17 thereof, then the first and foremost thing to be tested would be the valid action by the secured creditor under sub-section (2) of giving a valid notice and there- fore, there is failure on th....
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....rcise all or any of the rights under sub-section (4). The requirements of the notice under sub-section (2) is provided under sub- section (3) which clearly mandates that 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. If these details are not provided which are mandatory in nature or which casts a mandate upon the secured creditor to provide such details, the notice would be bad in law, which we have already held above. 44. In the present case, the borrower took an objection of non-compliance of sub-section (3), in his objection/representation given sub-section (3A), but despite the same the bank-secured creditor in the present case rejected the objection instead of ensuring the compliance of sub-section (3). A perusal of the notice under sub-section (2) which is already reproduced above does not spell out the details of the amount payable by the borrower, but only mentions a lump sum aggregate amount. The dispute with regard to rate of interest being charged by the bank was pre-existing the stage of section 13, and therefore, when the borrower called upon t....
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....hink twice before engaging in such litigation, as the one before us. 47. The appellant secured creditor ought to have at the first instance corrected its mistake by issuing a fresh notice providing the details of the amount payable by the borrower as also correcting the details of the secured assets rather than continuing to challenge it repeatedly before every possible forum and wasting its time. The litigation is ultimately going to cause suffering to the appellant-bank, i. e., secured creditor. 48. The Supreme Court in the case of Dnyandeo Sabaji Naik v. Pradhya Prakash Khadekar reported in [2017] 5 SCC 496 has frowned upon frivolous and groundless filings. We quote the relevant observations (page 504) : "13. This court must view with disfavour any attempt by a litigant to abuse the process. The sanctity of the judicial process will be seriously eroded if such attempts are not dealt with firmly. A litigant who takes liberties with the truth or with the procedures of the court should be left in no doubt about the consequences to follow. Others should not venture along the same path in the hope or on a mis placed expectation of judicial leniency. Exemplary costs are....