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Judgment
P.K. Bhasin, J
This appeal filed by ICICI Bank against an order of the Debts Recovery Tribunal (DRT), Lucknow, passed on 27.2.2017 in a Securitisation Application (S.A.) filed by the respondents herein under Section 17(1) the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). That order, according to the submissions made by the appellant Bank's Counsel, must shock the judicial conscience of this Appellate Tribunal having been passed by its learned Presiding Officer restraining the appellant Bank, as an interim relief to the defaulting borrowers, from taking over possession of their property mortgaged in its favour to secure the repayment of its dues under some financial facilities extended to them during the period 2010-2014 and which dues are now to the tune of over hundred crores, The grievance of the appellant Bank is that the impugned order has been passed by the Presiding Officer of the DRT totally ignoring the guidelines and throwing to the winds all legal norms laid down by the Apex Court which have to be kept in mind by all Courts/Tribunals while passing interim stay orders against the recoveries of public money which in the present case is over hundred crores. Expressing his extreme dismay against the manner in which the learned Presiding Officer has passed the impugned order, which I shall be noticing in a while, Mr. R.P. Aggarwal, learned Counsel for the appellant Bank, had submitted that this is a case where by a judicial order the objects behind the enactment of two Special Acts by the Parliament to ensure speedy recoveries of Banks' dues from defaulting borrowers have been defeated and the appellant Bank's efforts to recover over hundred crores have been brought to a grinding halt. Before proceeding further to examine whether the severe criticism expressed by the learned Counsel for the appellant Bank is justified or not the impugned order of the DRT needs to be noticed. The impugned order of the DRT, Lucknow reads as under:
"The applicants have prayed that respondent-Bank through its Authorized Officer, agent including enforcement agencies may be restrained to initiate the measures under Section 13 of the SARFAESI Act, 2002. In support of interim relief application, an affidavit has also been filed.
According to the applicants the enforcement agencies of the respondent-Bank had visited the impugned property on 12.10.2016. They threatened that respondent-Bank shall obtain physical possession of the property. The respondent-Bank has threatened to bring the police force to obtain the possession of the properties. The conduct of respondent No. 2 has been in gross violation of the SARFAESI Act, The respondent-Bank cannot be permitted to take physical possession of the secured asset as there has been non-compliance of Rule 8 of the Security Interest (Enforcement) Rules. The action of the respondent-Bank is liable to be stayed/set aside. The applicants have prayed that respondent-Bank be restrained from taking measures under Section 13 of the SARFAESI Act, 2002.
In reply to the interim relief application, the respondent Bank has led objection. The respondent Bank has taken symbolic possession of the property on 12.5.2016. The respondent Bank has also approached the District Magistrate under Section 14 of the SARFAESI Act, 2002 for taking physical possession of the secured asset. The respondent-Bank has also denied that they intended to take physical possession of the secured asset on 12.10.2016. The respondent Bank intends to take physical possession of the secured asset only in accordance with law.
Heard learned Counsel for both the parties and perused the record.
It is observed from the symbolic possession notice enclosed with the objection filed by the respondent-Bank that same is undated. However, it appears from the symbolic possession notice that the symbolic possession of Movable and Immovable properties were taken on 13.5.2016. Meaning thereby the Rule 8(1) was complied with by the respondent Bank on 13.5.2016. In pursuance of Rule 8(2) of the Security Interest (Enforcement) Rules, 2002, the possession notice was sent for publication on 12.5.2016 and it was published on 17.5.2016. It is observed from the documents enclosed with the objection filed by the respondent-Bank and the Annexure-A/9 to the S.A. that prior to taking symbolic possession on 13.5.2016, press notice was prepared one day in advance by the Authorized Officer of the respondent Bank and sent to two newspapers. The said action is not in conformity with the scheme provided under the Security Interest (Enforcement) Rules, 2002 as firstly Rule 8(1) is complied and thereafter Rule 8(2) is complied.
Learned Counsel for the respondent Bank has relied upon the following case laws:
Standard Chartered Bank v. Dharminder Bhohi, (VIII (2013) SLT 313 : IV (2013) BC 407 (SC) :2013) 15 SCC 341.
Clarity Gold Pvt. Ltd. v. State Bank of India, 2011(2) MH.LJ. 778.
Nippo Foods v. State of Punjab, AIR 2013 P&H, 89.
State Bank of India v. DRAT, AIR 2010 Delhi 83.
Kiran Devi Bansal v. DGM Small industries Development Bank of India, IV (2009) BC 56 (DB) (Gujarat High Court).
Sesha Saila Power & Engineering Pvt. v. State Bank of India & Ors., IV (2012) BC 490 (DB) (AP High Court).
State of Madhya Pradsh v. Jiyalal, (2009) 15 SCC 72.
None of the case laws stated above, permits that prior to taking possession, Press Note can be issued one day in advance. Hence, the interim relief prayed by the applicants deserves to be allowed.
ORDER
The interim relief application dated 19.10.2016 moved by the applicants is allowed. The respondent-Bank is restrained from taking the physical possession of the secured asset during the pendency of the S.A. However, in order to recover its dues, the respondent-Bank may proceed afresh strictly under the provisions of SARFAESI Act, 2002 and the Rules made thereunder.
Fixed 31.3.2017 for filling objection and final argument"
From a reading of the impugned order of the DRT, Lucknow it becomes clear that this matter centres around recovery of over hundred crores of 'public money' and, therefore, it will be appropriate to notice the developments brought about the Parliament during the period of last two decades in the field of recoveries of monies which the Banks have been finding it extremely difficult to recover from their defaulting borrowers.
Before 1993 the Banks had to file civil suits for recovering their dues from the defaulting borrowers to whom loans had been advanced but since that remedy of civil suits was not proving to be effective and in fact was quite cumbersome and time consuming out Parliament felt the need of bringing in some special piece of legislation which could ensure speedy recovery of public money. The Parliament enacted in the year 1993. The Recovery of Debts Dues to Banks and Financial Institutions Act, 1993 and after testing its efficacy another piece of legislation in the form of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was brought into existence in the year 2002 to ensure more speedier recoveries of money recoverable by Banks/Financial Institutions from their defaulting borrowers.
Both these legislations came to be examined by the Hon'ble Supreme Court in the case of United Bank of India v. Satyawati Tandon, III (2010) BC 495 (SC) : VI (2010) SLT 52 : AIR 2010 SC 3413 and this is what was observed in that judgment in respect of both these Acts:
"2. 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 repay the amount of loan, etc. Not only this, they instituted frivolous cases and succeeded in persuading the Civil Courts to pass orders of injunction against the steps taken by Banks and financial institutions to recover their dues. Due to lack of adequate infrastructure and non-availability of manpower, the regular Courts could not accomplish the task of expeditiously adjudicating the cases instituted by Banks and other financial institutions for recovery of their dues. As a result, several hundred crores of public money got blocked in unproductive ventures. In order to redeem the situation, the Government of India constituted a committee under the chairmanship of Shri T. Tiwari to examine the legal and other difficulties faced by Banks and financial institutions in the recovery of their dues and suggest remedial measures. The Tiwari Committee noted that the existing procedure for recovery was very cumbersome and suggested that special Tribunals be set up for recovery of the dues of Banks and financial institutions by following a summary procedure. The Tiwari Committee also prepared a draft of the proposed legislation which contained a provision for disposal of cases in three months and conferment of power upon the Recovery Officer for expeditious execution of orders made by adjudicating bodies. The issue was further examined by the Committee on the Financial System headed by Shri M. Narasimham. In its First Report, the Nara-simham Committee also suggested setting up of special Tribunals with special powers for adjudication of cases involving the dues of Banks and financial institutions.
After considering the reports of the two Committees and taking Cognizance of the fact that as on 30.9.1990 more than 15 lakh cases filed by public sector Banks and 304 cases filed by financial institutions were pending in various Courts for recovery of debts, etc. amounting to Rs. 6000 crores, the Parliament enacted the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short, 'the DRT Act'). The new legislation facilitated creation of specialised Forums i.e., the Debts Recovery Tribunals and the Debts Recovery Appellate Tribunals for expeditious adjudication of disputes relating to recovery of the debts due to Banks and financial institutions. Simultaneously, the jurisdiction of the Civil Courts was barred and all pending matters were transferred to the Tribunals from the date of their establishment.
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. 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 jurisdiction of Civil Courts for frustrating the proceedings initiated by the Banks and other financial institutions.
For few years, the new dispensation worked well and the officers appointed to man the Tribunals worked with great zeal for ensuring that cases involving recovery of the dues of Banks and financial institutions are decided expeditiously. However, with the passage of time, the proceedings before the Tribunals became synonymous with those of the regular Courts and the lawyers representing the borrowers and defaulters used every possible mechanism and dilatory tactics to impede the expeditious adjudication of such cases......
The survey conducted by the Ministry of Finance, Government of India revealed that as in 2001, a sum of more than Rs. 1,20,000/- crores was due to the Banks and financial institutions and this was adversely affecting the economy of the country. Therefore, the Government of India asked the Narasimham Committee to suggest measures for expediting the recovery of debts due to Banks and financial institutions. In its Second Report, the Narasimham Committee noted that the non-performing assets of most of the public sector Banks were abnormally high and the existing mechanism for recovery of the same was wholly insufficient. In Chapter VIII of the Report, the Committee noted that the evaluation of legal framework has not kept pace with the changing commercial practice and financial sector reforms and as a result of that the economy could not reap full benefits of the reform process. The Committee made various suggestions for bringing about radical changes in the existing adjudicator/mechanism. By way of illustration, the Committee referred to the scheme of mortgage under the Transfer of Property Act and suggested that the existing laws should be changed not only for facilitating speedy recovery of the dues of Banks, etc. but also for quick resolution of disputes arising out of the action taken for recovery of such dues. The Andhyarujina Committee constituted by the Central Government for examining Banking sector reforms also considered the need for changes in the legal system. Both, the Narasimham and Andhyarujina Committees suggested enactment of new legislation for securitisation and empowering the Banks and financial institutions to take possession of the securities and sell them without intervention of the Court. The Government of India accepted the recommendations 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 the 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."
(Emphasis laid by me).
After noticing the avowed objects behind the enactment of RDDBFI Act and SARFAESI Act the Hon'ble Supreme Court in the same judgment then went on to observe that Courts had been staying the recovery processes initiated by the Banks under SARFAESI Act which had the effect of defeating the object of speedy recoveries of Banks' dues from the defaulting borrowers. My attention was drawn to the following observations of the Apex Court by the learned Counsel for the appellant Bank wherein Hon'ble Supreme Court had expressed its displeasure against grant of interim injunctions against the Banks restraining them from availing of their remedies under the SARFAESI Act-
"10. Faced with the imminent threat of losing the mortgaged property, respondent No. 1 filed C.M.W.P. No. 55375 of 2009 and prayed that the appellant herein may be restrained from taking coercive action 'in pursuance of the notices issued under Section 13(2) and (4) and order dated 25.8.2008 passed by District Magistrate/Collector, Allahabad....
............It must be remembered that stay of an action initiated by the State and/or its agencies/instrumentalities for recovery of taxes, cess, fees, etc. seriously impedes execution of projects of public importance and disables them from discharging their constitutional and legal obligations towards the citizens. In cases relating to recovery of the dues of Banks, financial institutions and secured creditors, stay granted by the High Court would have serious adverse impact on the financial health of such bodies/institutions, which ultimately prove detrimental to the economy of the nation. Therefore, the High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters......."
(Emphasis laid by me)
It is not that the Apex Court had expressed its concern over the stalling of recoveries of public money by judicial orders only in Satyawati Tandon's case (supra). Way back in the year 1984 also same views were expressed in a judgment, 1984 (SLT Soft) 384 : AIR 1985 SC 330; 1985 SCR (2) 190, Assistant Collector of Central Excise, Chandan Nagar, West Bengal v. Dunlop India Ltd. and Ors. The relevant observations, which unfortunately have been ignored by the learned Presiding Officer in the present appeal and which judgment he must have come across many times while dealing with cases relating to recovery of Banks' dues, are reproduced below:-
"It is indeed a great pity and, we wish we did not have to say it but we are afraid, we will be signally failing in our duty if we do not do so-some Courts, of late, appear to have developed an unwarranted tendency to grant interim orders-interim orders with a great potential for public mischief for the mere asking. We feel greatly disturbed : We find it more distressing that such interim orders, often ex parte and non-speaking, are made even by the High Courts while entertaining writ petitions under Art. 226 of the Constitution,..........In several other cases,......this Court was forced to point out how wrong it was to make interim orders so soon as an application was but presented, when a second thought (or a second's thought) would expose the impairment of the public interest...
In Siliguri Municipality v. Amalendu Das (supra) A.P. Sen and M.P. Thakkar, JJ. had to deal with an interlocutory order passed by the Calcutta High Court restraining the Siliguri Municipality from recovering a graduated consolidate rate on the annual value of buildings in terms of the amended provisions of the Bengal Municipal Act We reiterate the following observations made therein: "We are constrained to make the observations which follows as we do feel dismayed at the tendency on the pan of some of the High Courts to grant interlocutory orders for the mere asking. Normally, the High Court should not, as a rule, in proceedings under Article 226 of the Constitution grant any stay of recovery of tax save under very exceptional circumstances. The grant to stay in such matters, should be an exception and not a rule.
....... The Court has to show awareness of the fact that in a case like the present a municipality cannot function or meet its financial obligations if its source of revenue is blocked by an interim order restraining the municipality from recovering the taxes......The grant of an interlocutory order of this nature would paralyze the administration and dislocate the entire working of the municipality........We can also take judicial notice of the fact that the vast majority of the petitions under Article 226 of the Constitution are filed solely for the purpose of obtaining interim orders and there after prolong the proceedings by one device or the other. The practice certainly needs to be strongly discouraged.........Where a plentitude of power is given under a statute, designed to meet a dire situation, it is no answer to say that the very nature of the power and the consequences which may ensue is itself a sufficient justification for the grant of a stay of that order, unless of course, there are sufficient circumstances to justify a strong prima facie inference that the order was made in abuse of the power conferred by the statute. A statutory order such as the one under Clause 8-B purports to be made in the public interest and unless there are even stronger grounds of public interest an ex parte interim order will not be justified...........To grant interim relief straightaway and leave it to the respondents to move the Court to vacate the interim order may jeopardise the public interest. It is notorious how if an interim order is once made by a Court, parties employ every device and tactic to ward off the final hearing of the application. It is, therefore, necessary for the Courts to be circumspect in the matter of granting interim relief, more particularly so where the interim relief is directed against orders or actions of public officials acting in discharge of their public duty and in exercise of statutory powers.............We repeat and deprecate the practice of granting interim order which practically give the principal relief sought in the petition for no better reason than that a prima facie case has been made out, without being concerned about the balance, of convenience, the public interest and a host of other relevant considerations..............
..............All this is not to say that interim orders may never be made against public authorities. There are, of course, cases which demand that interim orders should be made in the interests of justice. Where gross violations of the law and injustices are perpetrated or are about to be perpetrated, it is the bounden duty of the Court to intervene and give appropriate interim relief. In cases where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizen's faith in the impartiality of public administration, a Court may well be justified in granting interim relief against public authority. But since the law presumes that public authorities function properly and bona fide with due regard to the public interest, a Court must be circumspect in granting interim orders of far reaching dimensions or orders causing administrative, burdensome inconvenience or orders preventing collection of public revenue for no better reason than that the parties have come to the Court alleging prejudice, inconvenience or harm and that a prima facie case has been shown. There can be and there are no hard and fast rules. But prudence, discretion and circumspection are called for. There are several other vital considerations apart from the existence of a prima facie case. There is the question of balance of convenience. There is the question of irreparable injury. There is the question of the public interest. There are many such factors worthy of consideration........
We desire to add and as was said in Cassel and Co. Ltd. v. Broome(\) we hope it will never be necessary for us to say so again that 'in the hierarchical system of Courts' which exists in our country, 'it is necessary for each lower tier', including the High Court, 'to accept loyally the decisions of the higher tiers'. "It is inevitable in a hierarchical system of Courts that there are decisions of the Supreme Appellate Tribunal which do not attract the unanimous approval of all members of the judiciary.......
But the judicial system only works if someone is allowed to have the last word and that last word, once spoken, is loyally accepted". The better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system......
It is needless to add that in India under Article 141 of the Constitution the law declared by the Supreme Court shall be binding on all Courts within the territory of India and under Article 144 all authorities, civil and judicial in the territory of India shall act in aid of the Supreme Court.
........We do not have the slightest doubt that the orders of the learned Single Judge as well as Division Bench are wholly unsustainable and should never been made. Even assuming that the company had established a prima facie case, about which we do not express any opinion, we do not think that it was sufficient justification for granting the interim orders as was done by High Court. There was no question of any balance of convenience being in favour of the respondent-Company. The balance of convenience was certainly in favour of the Government of India. Governments are not run on mere Bank Guarantees. We notice that very often some Courts act as if furnishing a Bank Guarantee would meet the ends of justice. No Governmental business or for that matter no business of any kind can be run on mere Bank Guarantees. Liquid cash is necessary for the running of a Government as indeed any other enterprise. We consider that where matters of public revenue are concerned, it is of utmost importance to realise that interim orders ought not to be granted merely because a prima facie case has been shown. More is required. The balance of convenience must be clearly in favour of the making of an interim order and there should not be the slightest indication of a likelihood of prejudice to the public interest. We are very sorry to remark that these considerations have not been borne in mind by the High Court and interim order of this magnitude had been granted for the mere asking..........."
The learned Counsel for the appellant Bank continuing his salvo against the impugned order of the DRT restraining the Bank from taking over physical possession of its secured assets submitted that ignoring the displeasure expressed by the highest Court of the country against grant of injunctions against recoveries of Banks' moneys even by the High Courts the learned Presiding Officer of the DRT, Lucknow in the present case apparently harbouring under the impression that he was not bound by these decisions of the Apex Court and the same were meant to be followed only by the High Courts, has passed a blanket order restraining the appellant Bank from taking over the physical possession of its mortgaged assets during the pendency of the Securitisation Application filed by the respondents/defaulting borrowers herein under Section 17(1) of the SARFAESI Act and that too unconditionally and also ignoring the fact that the reason on which injunction was granted had not even been pressed into service by the Security Applicants before him. Public interest element in the prayer of interim relief has been totally kept under the carpet, submitted the appellant's Counsel. Thus, Counsel further submitted, the object behind the enactment of SARFAESI Act has been defeated not by the defaulting borrowers/mortgagors of this case who had approached the DRT for saving their assets mortgaged with the appellant Bank from being publicly auctioned but unfortunately by the DRT itself which is a creation of statute established to ensure speedy recoveries of public monies from the defaulting borrowers of Banks and other Financial Institutions.
Mr. Sanjeev Bhandari, learned arguing Counsel for the respondents assisted by Mr. Amit Dhall, Advocate on the other hand, referring to the severe criticism made against the impugned order by Mr. R.P. Aggarwal had submitted very fairly that this matter deserves to be remanded back to the DRT for fresh orders on the prayer of the respondents for interim protection. Mr. Bhandari and Mr. Dhall, also submitted that the grievance of the respondents before the DRT regarding noncompliance of Rule 8 was not that symbolic possession was taken on 13.5.2016 and citation for publication of notice was sent to Press on 12.5.2016, as has been observed by the DRT, and on the contrary it has been their case all along that the Bank had taken symbolic possession of its secured assets on 12.5.2016 but in fact their case was that the Bank had not issued separate notices for movable and immovable assets and also because Section 13(4) was invoked by the Bank without considering the additional representation against the demand notice under Section 13(2) of SARFAESI Act and also because the Bank had not given due credits for the payments made to the Bank and it had also not accounted for the FDRs in the name of the respondents lying with it as also no benefit of interest accrued thereon was given to the respondents. These were the submissions made even in the reply to the appeal filed by the respondents. Mr. Bhandari had also submitted that since the Bank was also contending that its case set up in its reply to the S.A. was not considered and the respondents are also raising the same grievance that even their case projected in the S.A. has not been examined by the DRT this Tribunal should remand the matter and the DRT can be directed to decide the matter afresh within a reasonable time but till fresh decision is taken the interim protection already granted to the respondents by the DRT should be allowed to be continued.
After giving my thoughtful consideration to the rival contentions and going through the impugned order of the DRT-I have unhesitatingly come to the conclusion that the learned Counsel for the appellant Bank Shri R.P. Aggarwal was quite justified in his criticism of the order under challenge which I have already reproduced. The learned Presiding Officer has very conveniently turned a blind eye to the judgments of the Apex Court, referred to above, which are binding on all subordinate Courts/Tribunals and the DRT, being the lowest Forum in the judicial hierarchy of the country, as far as Banking disputes are concerned, ought not to have passed the impugned order ignoring those judgments as also the public interest which under no circumstances could take precedence over private interest of the defaulting borrowers which, prima facie, the respondents herein are since they do not even claim that they do not own any money to the appellant Bank. Their only grievance is about adjustment of some negligible sums as against the dues of the Bank to the tune of much over hundred crores. The learned Presiding Officer has not even examined whether there was any balance of convenience in favour of the Security Applicants before him or who out of the two litigating parties in the S.A. was going to suffer irreparable loss and injury in the event of denial of interim relief to the respondents who were not even disputing that they had availed of financial facilities extended to them by the appellant Bank and that they still owe huge amount of money to the appellant Bank. This Tribunal can safely say that the DRT has by ignoring the decisions of the Apex Court in the field of recoveries of public money has in fact disobeyed the legal propositions laid down therein. So, the impugned order cannot be upheld at all.
There is another reason also for not sustaining the impugned order of the DRT. From a reading of the impugned order itself it becomes clear that the appellant Bank never wanted to take physical possession of the mortgaged assets on its own for which purpose it has to comply with the relevant Rule 8 as noticed by the DRT in the impugned order and the learned Presiding Officer has found that there was non-compliance of that Rule 8 while taking symbolical possession of the secured asset on 12.5.2016 and that non-compliance disentitles the Bank to take physical possession of its secured asset including by way of a petition under Section 14 of the SARFAESI Act. This reasoning of the learned Presiding Officer, which in fact was not even pressed into service by the respondents herein (Security Applicants before DRT) and is the new case spun by the Presiding Officer himself for the defaulting borrowers, in the facts of this case, is even otherwise contrary to the facts as well as legal position laid down by the Hon'ble Supreme Court in Standard Chartered Bank v. V. Noble Kumar and Ors., III (2016) DLT (Cri) 148 (SC) : IV (2016) SLT 531 : III (2016) BC 405 (SC) : III (2016) CCR 64 (SC) : (2013) 9 SCC 620, wherein while dealing with the argument raised before it on behalf of the defaulting borrower of that case that the Banks cannot straightaway approach the Magistrate under Section 14 of SARFAESI Act to seek police help for taking physical possession of their mortgaged assets and that too without complying with Rule 8 of the Security Interest (Enforcement) Rules, 2002, violation whereof in this case has been made the sole basis for granting blanket interim injunction by the DRT, it was held that before approaching the Magistrate the Banks/Receivers are not supposed to comply with the said Rule. The relevant paras from this judgment of the Apex Court are extracted below:
"4. The first respondent is a guarantor of the borrower to loan transaction whereby the second respondent borrowed money from the appellant herein. The undisputed facts are that the first respondent created a mortgage on certain property (Land and building comprised in Re-survey No. 493/2 lying within the sub-registration district of Saidapet hereinafter referred to as the "secured asset") owned by him to secure the abovementioned loan.
On 15.11.2007, a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the SARFAESI Act") demanding the repayment of the loan amount along with interest within a period of sixty days was issued inter alia to the borrower as well as the guarantor (Respondent Nos. 2 and 1 herein). The said notice also advised the Respondents to comply with the demand in order to avoid further action under the Act. The first Respondent neither made the payment nor raised any objection to the said demand.
Consequent upon the failure of the Respondents to make the payments the Appellant herein made an application under Section 14 of the SARFAESI Act in the Court of Chief Judicial Magistrate, Chengalpattu requesting him to take possession of the secured asset and to handover the same to the Appellant.
Pursuant to the abovementioned application, the Chief Judicial Magistrate, Chengalpattu by his proceeding dated 14.12.2009 appointed an Advocate Commissioner to take possession of the secured asset and to handover the same to the Appellant herein.
Challenging the legality of the proceedings dated 14.12.2009 the first Respondent approached the High Court. By the judgment under appeal, the first Respondent's writ petition came to be allowed by a Division Bench setting aside the order impugned therein.
The High Court recorded the submissions made before it as follows:
The learned Counsel appearing for the Petitioner raised two contentions, viz.:
(i) The Bank cannot bypass Section 13(4) of the SARFAESI Act and invoke the provisions of Section 14. He would submit, before invoking Section 14, that notice under Section 13(4) is necessary, otherwise the provisions of appeal under Section 17 will become illusory, particularly when the proceedings under Section 14 cannot be questioned by filing appeal before the Tribunal or before a Court.
(ii) In the event the procedures contemplated under Rule 8 of the Security Interest (Enforcement) Rules, 2002, are not followed before Section 74 is invoked, the order passed by the Chief Judicial Magistrate would be contrary to the said Rules and consequently, the order passed under Section 14 is liable to be set aside.
It is argued before the High Court as well as before us by the respondent that a secured creditor before invoking the authority of the Magistrate under Section 14 must necessarily make an attempt to take possession of the secured asset. Only when the creditor faces resistance to such an attempt the creditor could resort to the procedure under Section 14 of the Act. According to the first Respondent, Section 17 of the Act provides an "appeal" only against the measures taken by the creditor under Section 13(4) of the Act and no such appeal is available against an action taken by the Judicial Magistrate under Section 14 of the Act. Therefore, permitting the creditor to invoke Section 14 without first resorting to the procedure under Section 13(4) would deprive the owner of the secured asset an opportunity to prefer an "appeal" to have his grievances adjudicated. It is further argued that Rule 8 of the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the Rules") contemplates a procedure to be followed which includes a certain mode of publicity of taking possession to be made, and therefore, even a Magistrate exercising power under Section 14 of the Act is also required to follow the procedure contemplated under Rule 8 though the Rule does not expressly say so. Failure to comply with the requirement of Rule 8 in the instant case vitiated the order of the Magistrate.
The above mentioned submissions found favour with the High Court.
The learned Counsel appearing for the Appellant argued before us that the Act provided for two alternative procedures for taking possession of the secured assets under Sections 13(4) and 14 respectively. While Section 13(4) authorises the creditor himself to take possession of the secured assets without the aid of the State's coercive power, Section 14 enables the secured creditor to seek the assistance of the State's coercive power for securing the possession of the secured assets. It is submitted that it is always open to the secured creditor to choose one of the above, mentioned two procedures in a given case to obtain possession of the secured asset depending upon his own assessment of the situation regarding the possibility of resistance (by the debtor or guarantor as the case may be) for taking possession of the secured assets. It is also submitted that the fact that an "appeal" under Section 17 is available against the measures taken under Section 13(4) and such an "appeal" is not available against the measures taken by the Magistrate under Section 14 does not necessarily mean that the procedure under Section 14 cannot be resorted to without first exhausting the measures contemplated under Section 13(4). Lastly, it is submitted on behalf of the Appellant that the High Court completely erred in recording a conclusion:
In the event the secured creditor bypassing the provision of Section 13(4) and the Rule 8 and files an application under Section 14, a situation may arise that the Advocate Commissioner may straightaway take possession without there being compliance of any of the provisions of Section 13(4) or Rule 8. When both the provisions are read together, we could only come to the conclusion that the Legislature had not intended to create such a situation. The objection of Section 14 is only to be invoked in case the secured creditor faces obstruction and not as a routine, bypassing the provisions of Section 13(4).
In every case where the objections raised by the borrower are rejected by the secured creditor, the secured creditor is entitled to take possession of the secured assets. In our opinion, such action - having regard to the object and scheme of the Act - could be taken directly by the secured creditor. However, visualising the possibility of resistance for such action, Parliament under Section 14 also provided for seeking the assistance of the judicial power of the State for obtaining possession of the secured asset, in those cases where the secured creditor seeks it.
It is in the above-mentioned background of the legal frame of Sections 13 and 14, we are required to examine the correctness of the conclusions recorded by the High Court. Having regard to the scheme of Sections 13 and 14 and the object of the enactment, we do not see any warrant to record the conclusion that it is only after making an unsuccessful attempt to take possession of the secured asset, a secured creditor can approach the Magistrate. No doubt that a secured creditor may initially resort to the procedure under Section 13(4) and on facing resistance, he may still approach the Magistrate under Section 14. But, it is not mandatory for the secured creditor to make attempt to obtain possession on his own before approaching the Magistrate under Section 14.
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, appoint an officer subordinate to him as provided under Section 14 (1)(A) to take possession of the assets and documents. For that purpose the Magistrate may authorise the officer concerned to use such force as may be necessary. After the possession is taken the assets and documents will be forwarded to the secured creditor.
(iii) The third situation will be one where the secured creditor approaches the Magistrate concerned directly under Section 14 of the Act. The Magistrate will thereafter scrutinize the application as provided in Section 14, and then if satisfied, authorise a subordinate officer to take possession of the assets and documents and forward them to the secured creditor as under Clause (ii) above."
Thus ignoring this judgment also of the highest Court of the land the learned Presiding Officer has granted interim injunction in favour of the respondents merely on the asking and according the learned Counsel for the Bank unjustifiably the learned Presiding Officer has applied brakes to the further movement of the Bank towards getting actual physical possession of its secured asset through the State's coercive machinery as provided under Section 14 of SARFAESI Act bringing the legal process which the Bank was following to a grinding halt.
Learned Counsel for the appellant Bank had also submitted that even on facts the DRT has gone wrong when it was observed that possession notice was forwarded to Press for publication a day before taking over of symbolical possession of the secured assets by the appellant Bank. It was pointed out that symbolic possession of mortgaged property was even as per the respondents' case also was taken on 12.5.2016 and thereafter only notice was got published in newspapers and notice to Press was not sent before taking over of symbolic possession as observed by the DRT. Learned Counsel for the respondents, as noticed already, had fairly not supported this observation of the learned Presiding Officer and solely on which observation a blanket injunction to operate during the pendency of the S.A. was passed in favour of the defaulting borrowers and the appellant was restrained to not even have recourse to its remedy under Section 14. The liberty given to the Bank to initiate fresh action is meaningless and strikes at the root of the legislative intent behind incorporation of Section 14 in the SARFAESI Act and suggests the Bank to continue to have rounds and rounds of litigation thereby giving further undeserving advantage to the defaulting borrowers.
The learned Presiding Officer of DRT has also ignored the binding judgment of its own jurisdictional High Court which is Allahabad High Court. A Division Bench of Hon'ble Allahabad High Court in the case of Sushila Steels v. Union Bank of India and Ors., IV (2014) BC 518 (DB), Special Appeal No. 415 of 2014, decided on 23.4.2014, uncertified copy of which judgment was shown at the Bar by the learned Counsel for the appellant Bank and not disputed by the learned Counsel for the respondents, had dealt with the maintainability of a petition under Section 17 of SARFAESI Act at the instance of a defaulting borrower before taking over of possession of the mortgaged property by the secured creditor. The relevant paras from that judgment are reproduced below:
"The respondent-Bank issued a notice under Section 13(2) of SARFAESI Act, 2002 on 3.7.2012 which was modified by notice dated 9.7.2012. Against these notices, objections were filed by the appellant on 14.8.2012 and supplementary objections were also filed by the appellant on 23.8.2012. Objections raised by the appellant were rejected by order/letter dated 5.9.2012.
At the stage, when the objections were rejected, the appellant feeling aggrieved approached this Court by means of Writ Petition No. 51838 of 2012 which was dismissed by order dated 5.10.2012 on the ground of alternative remedy......
After dismissal of the writ petition on the ground of alternative remedy, the Bank issued possession notice dated 22.10.2012 which according to the learned Counsel for the appellant was in the nature of taking a measure as contemplated under Section 13(4) of SARFAESI Act, 2002. On receiving the possession letter dated 22.1.2012 the appellant initiated proceedings before the Debt Recovery Tribunal by filing S.A. No. 469 of 2012. The respondent-Bank raised preliminary objections as to the maintainability of S.A. on the ground that proceedings could not be maintained as the letter dated 22.10.2012 did not constitute a measure as contemplated under Section 13(4) of the SARFAESI Act, 2002. Supplementary objections in support of the preliminary objections were also raised. The appeal under Section 17 of the SARFAESI Act, 2002 filed by the appellant before the Debt Recovery Tribunal was dismissed by the Debt Recovery Tribunal on 17.12.2012 as non-maintainable. The Tribunal's order dated 17.12.2012 gave rise to Writ Petition No. 148 of 2013. The writ petition was also dismissed by means of the impugned judgment dated 21.1.2013.
The relevant extract of the judgment passed by the Writ Court is reproduced below:
"Rule 8 contemplates that the authorised officer shall take or cause to be taken possession by delivering a notice prepared in Appendix IV of the Rules. Therefore, when notice prepared under Appendix IV of the Rules is possession notice of immovable property and it dearly records that the possession has been taken of the property then an appeal shall lie there against under Section 17 of the Act.
A joint perusal of the aforesaid provision and appendix indicates that the notice in Appendix IV has to be referable to Section 13(4) of the Act and Rule 8 of the Rules, 2002.
The present notice does not indicate that possession has been taken. It is not even a notice in Appendix IV. The present notice indicates the intention of the Bank that it shall take or cause to be taken possession of the secured assets on the date and time mentioned thereunder in case the dues are not paid. Clearly it is not a notice under Section 13(4) of the Act read with Rule 8 of the Rules, 2002 and Appendix IV of the Act."
Before the Writ Court, submission of the learned Counsel for the appellant was to the effect that the letter dated 22.10.2012 amounts to a measure as contemplated under Section 13(4) of the SARFAESI Act, 2002 and therefore, Debt Recovery Tribunal ought not to have rejected the proceedings on the ground of maintainability, in support of this contention, reliance is placed upon the judgment, III (2009) BC 640 (SC) : VI (2009) SLT 10 : (2009) 8 SCC 366, Authorised Officer, Indian Overseas Bank & Anr.v. Ashok Saw Mill. On the strength of the judgment cited before us it is demonstrated that the Apex Court in the judgment (supra) has permitted the aggrieved person to agitate his grievance at a stage when all or any of the measures provided under Section 13(4) are/is resorted to and it is immaterial whether possession of the mortgaged property is actually taken over or not. Learned Counsel for the appellant has cited paragraph Nos. 26, 27, 28 and 29 of the aforesaid judgment before us in support of his contention.
On the other hand, learned Counsel for the respondent-Bank while meeting the submissions advanced by the appellant's Counsel has cited Standard Chartered Bank judgment of the Apex Court reported in III (2016) DLT (Cri) 148 (SC) : IV (2016) SLT 531 : III (2016) BC 405 (SC) : III (2016) CCR 64 (SC) : (2013) 9 SCC 260 and has drawn our attention to paragraph Nos. 27, 28, 36 and 37 of the later judgment. We do notice a state of uncertainty as regards the remedy available to an aggrieved person in the light of judgments passed by the Apex Court which deal with the law on the subject but we may not loose sight of the aspect that the objections raised by the appellant were rejected prior to institution of proceedings under Section 17 of the SARFAESI Act, 2002 and possession notice was thereafter issued on 22.10.2012 pursuant to which Panchnama was drawn. We also notice that separate proceedings for realisation of dues were also taken up by the Bank before the Recovery Tribunal independently under Recovery of Debts Due to Banks and Financial Institutions Act, 1993 by filing O.A. No. 521 of 2012 which is posted for final hearing on 13th May, 2014 before the Debt Recovery Tribunal, Lucknow, wherein, the appellant has an opportunity to take up his objection with regard to his liability.
The real issue before us is as to whether the proceedings before the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, 2002 would be maintainable or not before the actual possession is taken. If the answer is negative then the interpretation of mere issuance of possession notice in any format becomes immaterial till the actual possession is taken. In some cases, there is resistance on the part of borrower to deliver possession and on that basis, proceedings under Section 14 are initiated by the Bank or the Securitisation Agency. Yet in such situation, the proceedings under Section 17 of SARFAESI Act, 2002 would not lie till the possession of mortgaged property is delivered to the Bank. In this connection we may refer to Para 36 of the Apex Court judgment rendered in the case of Standard Chartered Bank v. V. Noble Kumar & Ors., (2013) 9 SCC 620 which enumerates three situation in Para 36.2 and 36.3.
In the instant case the Bank after dismissal of the writ petition took up proceedings under Section 14 of the SARFAESI Act, 2002 which are pending. The said proceedings were taken up on the ground that the borrower-appellant had failed to deliver possession to the Bank. The initiation of proceedings under Section 14 gave rise to Review Petition No. 382 of 2013 and the same was also dismissed in the light of observations made in sub Para 2 of paragraph 80 in Standard Chartered Bank case referred to above.
Learned Counsel for the appellant has argued that the later judgment rendered in the case of Standard Chartered Bank does not refer to the earlier judgment passed by the Apex Court, (2009) 8 SCC 366, therefore, the Tribunal fell into error by rejecting the proceedings initiated under Section 17 on the ground of maintainability.
We are of the considered opinion that the law declared by the Apex Court is binding on this Court and the later judgment passed by the Apex Court in the instant case, would hold the field. In these circumstances, the rejection of S.A. by the Tribunal has rightly been upheld by the learned Single Judge..........
The learned DRT had not only entertained the SA in the teeth of this judgment of its jurisdictional High Court and but also granted blanket unconditional unmerited stay on 27.2.2017 against the Bank ignoring this binding judgment also which had laid down the legal position regarding the maintainability of petitions under Section 17 of SARFAESI Act at the instance of borrowers before losing physical possession of the mortgaged properties.
No DRT can grant injunction, even interim, restraining secured creditors from having recourse to their rights and remedies, and remedy under Section 14 of SARFAESI Act being one of the remedies available to them recourse whereto can be had without compliance of Rule 8 of Rules of 2002 as held by the Hon'ble Supreme Court in the case of V. Noble Kumar (supra). The learned Presiding Officer of DRT in the present case has very conveniently turned a blind eye to this legal position and showered upon defaulting borrowers unmerited relief. Reliefs are not to be showered upon defaulting borrowers in such a way by the DRTs, which were established to ensure speedy recoveries of Banks and Financial Institutions and their creators expected through them achievement of that avowed object behind the enactment of SARFAESI Act which confers upon secured creditors right to take over the possession of the secured assets without the involvement of Courts/Tribunals by our Parliament, that the very object behind the enactment of this piece of legislation gets defeated.
In any event, grant of unconditional injunctions against recoveries of dues of Banks and Financial Institutions even as an interim relief has never been considered by any Court to be desirable and more particularly in cases where financial liability is not even disputed by the defaulting borrowers approaching the DRTs/DRATs. Hon'ble Bombay High Court in its judgment dated 20 April, 2009 in The Nashik Merchant's v. Aditya Hotels Pvt. Ltd., I (2010) BC 319 (DB), (CWP No. 6041/2008) had examined the question of grant of blanket stay against the recovery of Bank's dues and this is what was observed by the Court in the relevant paras of its judgment:
This petition, filed under Articles 226 and 227 of the Constitution of India, is seeking to challenge the order dated 21st February, 2008 passed by learned Presiding Officer of the Debt Recovery Tribunal, Pune (for short "DRT") in Securitisation Application No. 41 of 2007 together with judgment and order passed by the Debts Recovery Appellate Tribunal, Mumbai (for short "DRAT") dated 24th August, 2007 in Appeal No. 300 of 2007 and Miscellaneous Application No. 856 of 2007 and seeking directions against the respondent calling upon it to deposit an amount of Rs. 2 crores in DRT, Pune or with the petitioner Bank as indicated in the impugned order by the DRAT.
The DRAT, after hearing the parties, vide its judgment and order dated 24th August, 2007 allowed the appeal as well as the application for interim relief which was rejected by the DRT. In the said order, it is observed that on deposit of Rs. 2 crores in DRT, it would be expedient for the petitioner Bank to consider OTS proposal of the respondent. At this juncture, it is relevant to note that no time schedule was provided in the order for deposit of Rs. 2 crores in DRT. In other words, blanket interim order was passed without imposing any condition........respondent
In other words, it was expected on the part of DRAT to pass a conditional order while granting interim stay rather than granting blanket interim order........It washed its hands by granting blanket stay order staying the auction sale and thereby stalled the recover) of the Bank. A person, who was ready and willing to deposit an amount of Rs. 2 crores as per the statement appearing in the impugned order, was permitted to walk with unconditional blanket stay order. In our considered view, the DRAT has faulted in granting blanket stay.....
Having said so, we must deal with contention of the respondent that no pre-deposit could be insisted to entertain appeal, since it is hold to be first instance approach to the DRT. As per the judgment of the Apex Court in Mardia Chemicals Ltd. (supra), it is no doubt true that the DRT cannot insist upon for pre-deposit to entertain appeal but it can certainly impose reasonable conditions while granting interim stay. Power to grant interim relief carries with it power to put or impose conditions. In other words power to grant conditional stay is implicit, which by no means can be construed as pre-deposit to entertain appeal......."
The impugned order of the DRT thus cannot be sustained and is liable to be set aside.
And there is no question of remanding the matter back to the DRT for fresh consideration of the respondents' meritless prayer for interim protection against the taking over of physical possession of the mortgaged assets by the appellant Bank and that too by continuing the absolutely unmerited relief of interim injunction which stands granted to the respondents by the DRT, as was the submission of the learned Counsel for the respondents. The respondents have no case at all for restraining the appellant Bank from availing of the remedy under Section 14 of SARFAESI Act much less a strong prima facie case. Their grievances have been that the Bank had not given them adjustments of amount of various FDRs lying in its custody as also of interest accrued thereupon. The amount, adjustment of which was being claimed, was merely 1 crore odd, benefit whereof, as per the Bank's case had already been given to them. Therefore, there is no prima facie case for stalling the SARFAESI measures initiated by the appellant Bank under Section 14 of the SARFAESI Act when public interest is kept in mind considering the fact that over 100 crores of rupees the Bank is claiming from the respondents. Therefore, even the balance of convenience is not in favour of respondents for grant of relief against their dispossession from the mortgaged properties. When a borrower admits that it had availed of financial facilities from a Bank and the outstanding dues had not been cleared despite the Bank serving it with a notice of demand such borrowers like the respondents herein, then it does not lie in the mouth to say that they shall suffer irreparable loss and injury in case recovery of Banks dues from them is not stayed. Unfortunately, the learned DRT has not adverted to any of these aspects while granting blanket stay in favour of the respondents.
For the aforesaid reasons, this appeal of the Bank succeeds and the order dated 27.2.2017 passed by the DRT, Lucknow is set aside and now the appellant Bank will be at liberty to proceed further to take over the physical possession of its secured assets from the respondents in exercise of its right under Section 14 of SARFAESI Act.
Since the respondent's S.A. is pending before the DRT for quite sometime now and recovery of public money stands delayed because of the impugned order of the DRT, the learned Presiding Officer shall now dispose of the S.A. within 2 months from the date of receipt of this order and to ensure that it is done no unnecessary adjournments shall be granted to any of the parties. In case the S.A. is already listed on a date beyond the period of 2 months the same shall be preponed so that this direction is duly complied with. A compliance report shall be submitted to this Tribunal. Copy of this order shall be circulated by the Registry amongst all the DRTs under the jurisdiction of DRAT, Delhi and DRAT, Allahabad, for information of their Presiding Officers.