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Judgment
P.K. Bhasin, J
I have heard Counsel for the parties finally.
The appellant has filed this appeal against the order dated 26.12.2016 passed by the learned Presiding Officer of DRT-1, Delhi, which is reproduced below;
"1. Today the case is fixed for orders on the issue of interim relief.
In the present SA, by way of interim relief, it has been prayed to restrain the respondent Bank from taking physical possession of property in question i.e. property No. 868/18, Rajinder Singh, Lakramarg, Mundka, Delhi-110041.
Heard both the parties on the issue of interim relief. Learned Counsel for applicant submits that applicant herein is ready to deposit Rs. 1.0 lac before the date of possession. He further submits that as per his calculation, a sum of Rs. 9,67,200/- is the overdue amount against the applicant and applicant is ready to pay the entire overdue amount and wants to regularize the account as well. In the light of above, he prayed that respondent Bank may be restrained to take physical possession of the property in question which is schedule for 30.12.2016.
Learned Counsel for respondent Bank submits that total overdue amount against the applicants herein is Rs. 11.0 lacs and applicant may be directed to deposit the same within one month from today.
Heard rival submissions of both the parties. Considering the facts and circumstances, that applicant herein is ready to deposit the entire overdue amount of the Bank and wants to regularize the amount as well, thus, applicant herein is directed to deposit the amount with the respondent Bank in following manner--
(i) A sum of Rs. 2.0 lacs before 30.12.2016 (date fixed for taking physical possession of the property in question).
(ii) A sum of Rs. 5.0 within 15-days from today.
(iii) Thereafter remaining overdue amount within next 15-days.
(iv) Applicant herein shall also deposit regular instalments with the respondent Bank.
Subject to deposit of amounts, as directed hereinabove, respondent/learned Receiver is hereby restrained from taking possession of the property in question.
Respondent Bank is also directed to regularize the account of the applicant after receipt of entire overdue amount from the applicant herein.
It is also made clear that in case of single default in making the payment by the applicant, as directed hereinabove, respondent may proceed further for taking possession of property in question with the same Court Receiver, as per law.
It is further clarified that in case applicant does not deposit regular instalments with the Bank in future, respondent Bank may proceed further in accordance with law.
With the above said directions, this SA as well as issue of interim relief stand disposed off accordingly.
File be closed and consigned to records.
Dasti"
Perusal of this order of DRT shows that the appellant had filed an application being S.A. No. 304/2016 under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, SARFAESI Act), for protecting his possession of mortgaged property which he had mortgaged in favour of respondent to secure repayment of the loan taken from it.
I am of the view that as far as this appeal is concerned, the same is liable to be dismissed for the reason that the S.A. itself of the appellant was premature inasmuch as it had been filed at a stage when respondent had not taken over the physical possession of the mortgaged assets of the appellants. The appellants had come to the DRT with the grievances that the actions of the respondent under the SARFAESI Act were not in accordance with law.
Recently, vide my detailed order in II (2017) BC 98 : Misc. Appeal No. 60/2016, Vikram Bakshi & Company Pvt. Ltd. v. Housing Development Finance Corporation Ltd. & Ors., I have held that in view of the decision of the Hon'ble Supreme Court in Standard Chartered Bank v. V. Noble Kumar & Others, III (2016) DLT (Cri) 148 (SC) : IV (2016) SLT 531 : III (2016) BC 405 (SC) : III (2016) CCR 64 (SC) : (2013) 9 SCC 620, which has been followed by Calcutta High Court, the Securitization Applications under Section 17(1) of the SARFAESI Act are not maintainable before actual physical possession of the mortgaged/secured assets is taken over by the Banks/financial institutions. The relevant paras of the order passed by me in Vikram Bakshi's case (supra) are re-produced below:
This appeal as well as many other appeals filed by aggrieved persons who were unsuccessful in getting ad interim reliefs from DRTs in different S.As. filed to protect their mortgaged assets from being publicly auctioned by Banks and Financial Institutions concerned to recover the amounts of money lent to them involve a question of law applicable in all such matters. That question of law is:
"Whether an aggrieved borrower or any other person facing threat of dispossession from mortgaged assets at the hands of lending Banks/Financial Institutions can approach DRTs under Section 17(1) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act') without first having lost physical possession of the mortgaged assets?"
This question had arisen because of the following observations made by the Hon'ble Supreme Court in the case of Standard Chartered Bank v. V. Noble Kumar & Others (supra):
"27......Therefore, the borrower is always entitled to prefer an 'appeal' under Section 17 after the possession of the secured asset is handed over to the secured creditor.
It can be noticed from the language of the proviso to Section 13(3A) and the language of Section 17 that an 'appeal' under Section 17 is available to the borrower only after losing possession of the secured asset. The employment of the words 'aggrieved by taken by the secured creditor' in Section 17(1) clearly indicates the appeal under Section 17 is available to the borrower only after losing possession of the property. To set at naught any doubt regarding the interpretation of Section 17, the proviso to Sub-section (3A) of Section 13 makes it explicitly clear that either the reasons indicated for rejection of the objections of the borrower or the likely action of the secured creditor shall not confer any right under Section 17."
On the question whether 'possession' will include symbolic possession also which the Banks are resorting to these days and whether the Banks taking symbolic possession only (paper possession) of its secured assets the aggrieved persons can maintain petitions under Section 17(1) of SARFAESI Act the Hon'ble Supreme Court had observed as under in its judgment in the case of Transcore v. Union of India (UOI) & Anr., VIII (2006) SLT 617 : I (2007) BC 33 (SC) : 135 (2006) DLT (SC) 151 : AIR 2007 SC 712:
"The short question under this head is whether recourse to take possession of the secured assets of the borrower under Section 13(4) of the NPA Act comprehends the power to take actual possession of the immovable property.
Mr. N.C. Sahni and Mr. Pankaj Gupta, learned Advocates appearing on behalf of the respective borrowers submitted that Section 13(4) of the NPA Act empowers the secured creditor to take possession of the secured immovable assets of the borrower on expiry of sixty days and notice served under Section 13(2) of that Act. It is pointed out that in many cases, the Banks/FIs. have taken actual physical possession whereas in other cases they have taken only a symbolic possession. Learned Advocates submitted that in Kalyani Sales Co., the High Court has rightly held that if physical possession is taken on expiry of sixty days, the remedy of application under Section 17 of the NPA Act by the borrower would become illusory and meaningless as the borrower or the person in possession would be dispossessed even before adjudication of the objections by the Tribunal. Learned Advocates further submitted that under Section 13(8), the Bank/Financial Institutions is prevented from selling the secured assets, if the dues of the secured creditor with all costs, charges and expenses are tendered to the secured creditor at any time before the date fixed for sale. Learned Advocates pointed out that under Rule 8(1) of the 2002 Rules, a secured creditor is empowered to take possession as per notice appended in terms of Appendix IV. That notice cautions the borrower not to deal with the property. Learned Advocates submitted that notice in terms of Rule 8(1) of the 2002 Rules operates as attachment. It contemplates a symbolic possession. Learned Advocates submitted that actual physical possession of immovable assets can be taken under Rule 8(3), in cases where there is a vacant plot or a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice under Rule 8(1); that actual physical possession is to be delivered only after confirmation of sale under Rule 9(6) read with Appendix V under which the authorised officer is empowered to deliver the property to the purchaser free from all encumbrances in terms of Rule 9(9) of the 2002 Rules. Learned Advocates, therefore, submitted that the High Court was right in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice under Section 13(4) of the NPA Act so as to defeat the adjudication of his claim by the DRT under Section 17 of NPA Act, and that, physical possession can be taken only after the sale is confirmed in terms of Rule 9(9) of the 2002 Rules.
We do not find any merits on the above contentions for the following reasons.
The word possession is a relative concept. It is not an absolute concept. The dichotomy between symbolic and physical possession does not find place in the Act. As stated above, there is a conceptual distinction between securities by which the creditor obtains ownership of or interest in the property concerned (mortgages) and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the satisfaction of the debt (charges). Basically, the NPA Act deals with the former type of securities under which the secured creditor, namely, the Bank/Financial Institutions obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the Courts/Tribunals.
Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under Section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets. Section 13(4-A) refers to the word 'possession' simplicitor. There is no dichotomy in Sub-section (4-A) as pleaded on behalf of the borrowers. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. It inter alia states that notice is given to the borrower who has failed to repay the amount informing him and the public that the Bank/Financial Institutions has taken possession of the property under Section 13(4) read with Rule 9 of the 2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and delivery of possession. Rule 9(6) states that on confirmation of sale, if the terms of payment are complied with, the authorised officer shall issue a sale certificate in favour of the purchaser in the form given in Appendix V to the 2002 Rules. Rule 9(9) states that the authorised officer shall deliver the property to the buyer free from all encumbrances known to the secured creditor or not known to the secured creditor, (emphasis supplied). Section 14 of the NPA Act states that where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred, the secured creditor may, for the purpose of taking possession, request in writing to the District Magistrate to take possession thereof. Section 17(1) of NPA Act refers to right of appeal. Section 17(3) states that if the DRT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under Section 13(4) taken by the secured creditor are not in accordance with the provisions of the Act, it may by order declare that the recourse taken to any one or more measures is invalid, and consequently, restore possession to the borrower and can also restore management of the business of the borrower. Therefore, the scheme of Section 13(4) read with Section 17(3) shows that if the borrower is dispossessed, not in accordance with the provisions of the Act, then the DRT is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. As stated above, the NPA Act provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8, undoubtedly, refers to sale of immovable secured asset. However, Rule 8(4) indicates that where possession is taken by the authorised officer before issuance of sale certificate under Rule 9, the authorised officer shall take steps for preservation and protection of secured assets till they are sold or otherwise disposed of. Under Section 13(8), if the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charges and expenses referred to in Section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a Court Receiver under Order 40 Rule 1, CPC. The Court receiver can take symbolic possession and in appropriate cases where the Court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorized officer under Rule 8 has greater powers than even a Court receiver as security interest in the property is already created in favour of the Banks/Financial Institutions. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the circumstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules."
(Emphasis supplied)
I had also noticed that the DRTs were entertaining petitions under Section 17(1) of SARFAESI Act even before dispossession of the mortgagors from the mortgaged properties and in some cases ad interim injunctions were being granted against dispossession of the mortgagors from mortgaged assets a measure adopted by Banks/Financial Institutions in exercise of their powers under Section 13(4) of SARFAESI Act.
Even in Parliament when the recent amendments in the Securitisation law were being debated it was highlighted on behalf of the Government that earlier to the enactment of SARFAESI Act the Banks were chasing defaulting borrowers whose accounts had been declared NPAs to recover their loans and the Banks were involved in long drawn legal battles while the defaulting borrowers continued to enjoy the mortgaged assets in their possession but with the Banks starting to implement stringent law in the form of SARFAESI Act the defaulting borrowers were first being thrown out of their houses/factories and then only they were becoming entitled to approach DRTs to get back the possession of the assets from which they, had been dispossessed and under the threat of physical dispossession the borrowers had started repaying also the outstanding dues. This was one of the objects behind the enactment of the SARFAESI Act.
One judgment of the Hon'ble Supreme Court in United Bank of India v. Satyawati Tandon, III (2010) BC 495 (SC) : VI (2010) SLT 52 : (2010) 8 SCC 110 also came to my notice wherein the following observations were made by the Hon'ble Supreme Court in respect of recovery of Banks' money being stayed:
"17. ..........In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc., the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are code unto themselves..............
18.......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...."
Though in this judgment itself it had also been observed that DRTs are empowered to grant interim reliefs but the question which arose was when the DRTs should entertain the challenge to the legality of the measures adopted by Banks/Financial Institutions under Section 13(4) of SARFAESI Act and what kind on interim reliefs should be granted by DRTs and at what stage.
When such like matters where the borrowers approaching the DRTs before losing physical possession of mortgaged assets were not successful in getting interim injunction against dispossession came up for consideration and hearing before me I had raised the already formulated question suo moto in view of the decision of Hon'ble Supreme Court in V. Noble Kumar's judgment (supra). This question was posed by me before the members of the Bar who were appearing in different appeals arising out of the orders of different DRTs whereby interim injunction against the dispossession of the aggrieved appellants from their properties mortgaged with the concerned Banks/Financial Institutions had been denied. It was put to the learned members of the Bar while hearing their appeals as to how petitions under Section 17(1) of SARFAESI Act can be converted into and entertained like suits for permanent injunction wherein tribunals can restrain the Banks/Financial Institutions permanently from invoking their remedies under Section 13(4) and ad interim stay could also be granted against dispossession of the mortgagors from the assets which they had mortgaged in favour of the Banks/Financial Institutions to secure the repayment of money financed by them and why it could not be said that asking from DRTs the relief of injunction restraining the Banks/Financial Institutions from taking over of the physical possession of their secured/mortgaged assets will defeat the very object of promulgation of SARFAESI Act by Parliament.
It was then that one order dated 29.10.2015 passed by my learned predecessor Hon'ble Justice Ranjit Singh in X (2014) SLT 181 : IV (2014) ACC 929 (SC) : Appeal No. 122 of 2016, Mali Ram Aggarwal v. HDFC Bank, was cited before me by the learned Advocates and it was urged by them that this question of law having already been examined by my learned predecessor and that too after taking note of the judgment of the Hon'ble Supreme Court in V. Noble Kumar's case (supra) and it having been held that this judgment does not create any bar against the entertainment of petitions under Section 17(1) of SARFAESI Act even before the Banks or Financial Institutions succeed in dispossessing physically the aggrieved persons from the mortgaged/secured assets I should not once again start that legal debate and propriety demands that I should follow the earlier verdict of this very Tribunal in Mali Ram's case (supra).
Learned members of the Bar also placed reliance on the judgments of the Hon'ble Supreme Court and contended that the decision in V. Noble Kumar's case was per incuriam inasmuch as in the earlier decisions the Apex Court itself had held that even when symbolic possession only and not physical possession is taken by the Banks/Financial Institutions remedy under Section 17(1) of SARFAESI Act becomes available to aggrieved borrowers/mortgagors.
However, in none of the judgments cited before me it was ever held that to maintain a petition under Section 17(1) it was sufficient if only paper possession is shown to have been taken by Banks/Financial Institutions and it was not necessary that the borrowers/mortgagors must have been dispossessed physically. In fact strong reliance was placed on the decision of this Tribunal in Mali Ram's appeal.
However, it may be stated here that none of the learned Advocates who had addressed me on this legal question had submitted that the earlier decision of my learned predecessor in Mali Ram's case had any binding force though it had strong persuasive value and if I were to differ with that view a settled position where DRTs were entertaining petitions under Section 17(1) of SARFAESI Act will become unsettled and DRTs will once again start rejecting the SAs at the threshold as being not maintainable.
I was, however, saved from the botheration of going into the aspect whether as a matter of judicial propriety and consistency I should also hold that V. Noble Kumar's decision is no hurdle in the entertainment of SAs by DRTs even before the aggrieved persons are dispossessed by the Banks/Financial Institutions, as had been held by my learned predecessor in Mali Ram's appeal (supra), when one learned Counsel representing a Bank produced before me one Single Judge Bench decision of Calcutta High Court rendered on 6th May, 2014 in W.P. No. 353/2014, Mercury Exporters & Manufacturing Pvt. Ltd. & Anr. v. Punjab National Bank & Anr, wherein the decision of Hon'ble Supreme Court in the case of V. Noble Kumar (supra) was considered when it was brought to its notice that DRTs within the jurisdiction of Calcutta High Court were entertaining SAs despite the fact that the Supreme Court had in V. Noble Kumar's judgment held that remedy under Section 17(1) of SARFAESI Act was not available to any aggrieved person/borrower unless physical possession of mortgaged/possession whereof was being sought to be taken over by Banks/Financial Institutions to recover their dues from the defaulting borrowers whose accounts had been declared as Non Performing Assets (NPAs). The Single Bench of High Court had dealt with the matter in the following paras:
"The challenge in this writ petition is to a notice dated 22nd February, 2010 issued by Punjab National Bank. Although the said notice was issued in purported exercise of power conferred by Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter 'the Act'), the Bank did not take possession of the secured asset, instead, by the said notice it conveyed its decision of taking possession of the secured asset if the petitioners failed to deliver possession before 12th March, 2010.
It is not in dispute that challenging the aforesaid notice, an application under Section 17 of the Act was filed by the petitioners before the Debts Recovery Tribunal having jurisdiction and the petitioners also obtained an interim order of injunction which remained operative for nearly four years. Only recently, the application under Section 17 of the Act has been rejected by the Tribunal on the ground that the same is premature.
It is further not in dispute that challenging the order of dismissal of the application under Section 17 of the Act, the petitioners filed a recalling application and this writ petition has been presented at a point of time when the recalling application was pending before the Tribunal. That the recalling application has since been dismissed by the Tribunal yesterday, is also not in dispute.
xxx xxx xxx
Mr. Sen, learned Advocate for the petitioners led by Mr. Talukdar, learned Senior Advocate submits that the very invocation of the SARFAESI Act by the Bank is illegal and, therefore, notwithstanding the Forum that may be available under Section 17 of the Act, as and when possession of the secured asset is taken, the writ Court ought to entertain this writ petition and decide once and for all as to whether the Bank is justified in issuing the demand notice under Section 13(2) of the Act.
xxx xxx xxx
It is not in dispute that the Bank has taken symbolic possession of the secured asset and despite rejection of the application under Section 17 of the Act, it is yet to take physical possession of the secured asset. In view of the decision of the Supreme Court in Standard Chartered Bank v. V. Noble Kumar, III (2016) DLT (Cri) 148 (SC) : IV (2016) SLT 531 : III (2016) BC 405 (SC) : III (2016) CCR 64 (SC) : (2013) 9 SCC 620, approach under Section 17(1) of the Act can be made only after possession of the secured asset is lost.
Section 17(3) of the Act empowers the Tribunal to direct restoration of possession of the secured asset in favour of the borrower if the secured creditor is found to have violated the provisions of the Act.
xxx xxx xxx
The petitioners would, therefore, be free to approach the Tribunal under Section 17 of the Act once physical possession of the secured asset is taken. At this stage, no right of the petitioners is affected by the action taken in terms of the Act so as to call for interference by the writ Court.
xxx xxx xxx
This order shall not preclude the petitioners approach the Tribunal at the appropriate stage and to raise all points before it in respect of their claim that the Bank was not justified in invoking the provisions of the Act and if such application is made, it shall be the duty of the Tribunal to examine such claim of the petitioners and pass necessary order in accordance with law."
This order was challenged before the Division Bench in APO No. 177 of 2014 and the appeal was decided on 20th May, 2014 by the following order:
"The appeal is directed against an order of May 6, 2014 by which the writ petition has been dismissed on the ground that the petitioners' remedy under Section 17 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 would be available at the appropriate stage.
The writ petition was directed against a notice dated February 22, 2010 issued by the Bank in exercise of its authority under Section 13(4) of the said Act. The Bank did not take possession of the secured assets, but by the said notice conveyed its decision of taking possession of the secured assets if the petitioners failed to pay off the dues prior to May 12, 2010.
The Single Bench has noticed the judgments reported at AIR 2010 SC 3413 (United Bank of India v. Satyawati Tandon and (2013) 9 SCC 620, Standard Chartered Bank v. V. Noble Kumar) for the width of the authority of the Debts Recovery Tribunal under Section 17 of the said Act. The order has not precluded the petitioners from approaching the Tribunal at the appropriate stage to raise all points before it.
xxx xxx xxx
Even if a secured creditor wants to proceed against the assets which are not covered by the Act, the Tribunal under the said Act would have the authority to undo any wrong that may have been committed by the Bank. As is apparent in this case, the Bank had issued notice under Section 13(2) of the Act, waited for the petitioners' reply thereto and thereafter issued notice indicating that the Bank would take possession of the secured assets if the money due to the Bank was not tendered by a certain date. It is not the petitioners' case that the money has been paid. In such circumstances, in view of the decision in V. Noble Kumar, the debtor has to await the measures under Section 13(4) of the Act being taken by the secured creditor before approaching the appropriate Tribunal.
There does not appear to be any error in the order impugned warranting interference. The appeal, APO No. 177 of 2014, and the stay petition, GA No. 1600 of 2014, are dismissed without any order as to costs.
Nothing in this order should prejudice the writ petitioners in the event an appropriate petition is carried to the Tribunal under Section 17 of the said Act of 2002."
Thereafter also same point continued to be agitated before the Calcutta High Court in various writ petitions but that High Court maintained its view that unless physical possession of mortgaged is lost by the mortgagors/borrowers petitions under Section 17(1) of SARFAESI Act are not maintainable.
Calcutta High Court in W.P. No. 18175 (W) of 2014, Sri Tapas Ghosh v. Union of India & Ors., while deciding the writ petition on 27.6.2014 had dealt with the submissions centering Around V. Noble Kumar's judgment as under:
"The petitioner is the debtor of the respondent No. 2. Steps have been taken by the respondent No. 2 in terms of the provisions of Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter the Act) upon the petitioner failing to repay his dues. Although physical possession of the secured asset has not yet been handed over to the respondent No. 2, its authorised officer has issued an e-auction notice which has been published in a Bengali daily on 28th May, 2014. The petitioner apprehends that in view of the order dated 6th May, 2014 passed by this bench in W.P. No. 353 of 2014, the Tribunal having jurisdiction would not entertain his application under Section 17 of the Act against the impugned e-auction notice on the ground that possession of the secured asset is yet to be handed over to the respondent No. 2 or its authorised officer.
The order dated 6th May, 2014 referred to above was passed upon consideration of the law laid down by the Supreme Court in Standard Chartered Bank v. V. Noble Kumar. (2013) 9 SCC 620. The said order dated 6th May, 2014 was carried in appeal (APO No. 177 of 2014). The Hon'ble Division Bench by its order dated 20th May, 2014 has affirmed the view taken by this Bench and dismissed the appeal.
The petitioner may be right in his apprehension that the Tribunal may not entertain his application under Section 17 of the Act at this stage, but presently that is the law in view of the decision in V. Noble Kumar (supra) and, therefore, he has to wait till he loses possession. At this stage, no right of the petitioner is affected so as to call for interference."
Similarly, W.P. No. 15206 (W) of 2014, Sri Dipak Ranjan Sinha Roy v. The Authorised Officer, was decided by Calcutta High Court on 4 June, 2014 with the following observations:
"Since the possession of the secured asset has not been taken over by the secured creditor, the petitioner can wait till such time the possession is taken and then approach the Tribunal under Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereafter the Act). This would be in consonance with the law laid down by the Supreme Court in Standard Chartered Bank v. V. Noble Kumar, (2013) 9 SCC 620.
The order impugned is not interfered. The writ petition stands dismissed with liberty as aforesaid."
In M/s. Vision Comptech Integrators v. State Bank of India & Ors., IV (2014) BC 729 : W.P. No. 16033 (W) of 2014, Calcutta High Court dealt with the submission made regarding V. Noble Kumar's judgment as under vide order dated 20 June, 2014:
"3. According to Mr. Mitra, learned Senior Advocate for the petitioner, I had taken the view in Mercury (supra), relying upon the decision of the Supreme Court in Standard Chartered Bank v. V. Noble Kumar, (2013) 9 SCC 620, that the petitioner therein would be entitled to present an application under Section 17 of the Act before the relevant Tribunal only after possession of the secured asset is handed over to the secured creditor........
Mr. Mitra, in his usual politeness, submitted that the ratio of the decision in V. Noble Kumar (supra) may require reconsideration and appealed that the writ petition be entertained and the contentious issues decided.
Till the decision in V. Noble Kumar (supra) was rendered, I read and understood the provisions of the Act as not requiring any notice in Appendix IV to be issued by the secured creditor to a borrower before possession, either physical or symbolic, is taken over but conferring a right on such borrower or any aggrieved person to approach the Tribunal under Section 17 of the Act immediately after possession of the secured asset, either physical or symbolic, were taken by the secured creditor and notice to this effect in Appendix IV issued in terms of Rule 8(1) of the Rules; or to apply under Section 17 of the Act in a case where either physical or symbolic possession has not been taken, yet, a sale notice is issued in respect of the secured asset inviting offers from interested purchasers. This understanding was based on the contents of Section 13(4) of the Act and Rule 8(1) of the Rules read with Appendix IV appended thereto, more specifically the second paragraph of Appendix IV requiring the authorised officer to say that 'the undersigned has taken possession of the property described hereinbelow...' and the requirement of Sub-rule (2) of Rule 8 in regard to publication of notices in newspapers, which in effect is a warning to the public not to deal with such property, of which possession has been taken. That symbolic possession of a secured asset could be taken by a secured creditor instead of actual possession appears on a reading of Sub-rule (3) of Rule 8 and, therefore, there could be no reason to deny an aggrieved person the right to approach the tribunal once symbolic possession of the secured asset is taken.
However, such understanding has taken a toss with the enunciation of law in the decision in V. Noble Kumar (supra). While considering when an application/appeal under Section 17 could be presented, it has clearly been laid down therein that a borrower is entitled to prefer an appeal under Section 17 of the Act after the possession of the secured asset is handed over to the secured creditor (paragraph 27), and appeal under Section 17 is available to the borrower only after losing possession of the property (paragraph 28). The decision also lays down the law that after possession is handed over to the secured creditor, the subsequent specified provisions of Rule 8 concerning the preservation, valuation and sale of the secured assets, as well as the rules following the same, would apply (paragraph 36.4).
It would be proper at this stage to quote hereunder the relevant paragraphs from the said decision:
"27. The 'appeal' under Section 17 is available to the borrower against any measure taken under Section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditor. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under Section 13(4). Alienating the asset either by lease or sale, etc. and appointing a person to manage the secured asset are some of those possible measures. On the other hand, Section 14 authorises the Magistrate only to take possession of the property and forward the asset along with the connected documents to the borrower (sic the secured creditor). Therefore, the borrower is always entitled to prefer an 'appeal' under Section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4)(a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under Section 14. We are of the opinion that by whatever manner the secured creditor obtains possession either through the process contemplated under Section 14 or without resorting to such a process obtaining of the possession of a secured asset is always a measure against which a remedy under Section 17 is available.
It can be noticed from the language of the proviso to Section 13(3-A) and the language of Section 17 that an 'appeal' under Section 17 is available to the borrower only after losing possession of the secured asset. The employment of the words 'aggrieved by... taken by the secured creditor' in Section 17(1) clearly indicates the appeal under Section 17 is available to the borrower only after losing possession of the property. To set at naught any doubt regarding the interpretation of Section 12, the proviso to Sub-section (3-A) of Section 13 makes it explicitly clear that either the reasons indicated for rejection of the objections of the borrower or the likely action of the secured creditor shall not confer any right under Section 17.
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 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.
36.2. (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 scrutinise 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.
36.3. (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 scrutinise 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 36.2.(ii) above.
36.4. In any of the three situations above, after the possession is handed over to the secured creditor, the subsequent specified provisions of Rule 8 concerning the preservation, valuation and sale of the secured assets, and other subsequent rules from the Security Interest (Enforcement) Rules, 2002, shall apply."
Mr. Mitra contended that the observations made in paragraph 27 of the decision must be confined to cases where Section 14 of the Act is invoked by the secured creditor, whereas the observations made in paragraph 28 could apply to cases where symbolic possession is taken and not actual physical possession. According to him, what the Supreme Court intended to mean by the words 'losing possession' is that the secured creditor had taken action in terms of Section 13(4)(a) by issuing a possession notice in Appendix IV and, therefore, even at that stage, an application under Section 17 of the Act would be maintainable. He also contended that the decision does not, in so many words, lay down the law that issuance of the possession notice is a condition precedent for taking possession of the secured asset.
I am afraid, the submissions of Mr. Mitra do not appeal to me in view of the observations made in paragraph 36 and its several sub-paragraphs extracted supra. Paragraph 36.1 says that the secured creditor has to take possession and thereafter proceed for sale of the secured assets to realise the amounts claimed by it. Paragraph 36.4 refers to 'possession... handed over to the secured creditor' and not 'losing possession'. My reading of the decision in V. Noble Kumar (supra), insofar as a borrower (as defined in Section 2(f) of the Act) is concerned, is that 'handing over of possession' and 'losing possession' carry the same meaning in the sense that the same could be used inter-changeably as and when the secured creditor gets physical possession of the secured asset and that it is only after handing over of physical possession of the secured asset from the borrower to the secured creditor that the borrower acquires the right to move the Tribunal. Although not arising for a decision directly on this writ petition, the Tribunals/Courts in an appropriate case may have to consider whether a sale notice in respect of a secured asset can at all be issued after valuing such asset, without possession thereof being handed over to the secured creditor from the borrower in view of the decision in V. Noble Kumar (supra). My understanding of the Supreme Court's interpretation of the relevant law in that case is that steps for preservation, valuation and sale of a secured asset must follow possession of the secured asset. 1 have not been able to read paragraph 36.4 otherwise."
Again, W.P. 20176 (W) of 2014, Suhas Kumar Ghosh v. State of West Bengal & Ors., was decided on 21 July, 2014 by the Calcutta High Court by passing the following order:
"In view of the dicta of the Supreme Court in Satyawati Tondon (supra) as well as a decision of recent origin reported in (2013) 9 SCC 620 (Standard Chartered Bank v. V. Noble Kumar, the petitioner must approach the relevant tribunal having jurisdiction once possession of the secured asset is handed over to the secured creditor."
Thus, Calcutta High Court has categorically held that in view of the decision of the Apex Court in V. Noble Kumar's case petitions under Section 17(1) of SARFAESI Act are not maintainable unless Banks/Financial Institutions take over actual physical possession of mortgaged assets.
The leaned Counsel for the borrowers however, continued to persuade me to follow the decision of my learned predecessor in Mali Ram appeal in preference to any contrary view on the point in issue and not to take a view that physical possession of the mortgaged asset has to be lost by the borrower or any other person before approaching DRTs and also to accept that since in practice Banks/Financial Institutions are taking 'symbolic possession' only of the mortgaged assets before issuing sale notices petitions under Section 17(1) can be maintained upon 'symbolic possession' only being taken by Banks/Financial Institutions.
In the hierarchical judicial system that we have, better wisdom of the Court below has to yield to higher wisdom of the Court above and, therefore, once an authority higher than this Tribunal has expressed an opinion on the core issue regarding the decision in V. Noble Kumar's judgment this Tribunal is no longer at liberty to rely upon earlier decision of this Tribunal. Calcutta High Court being a non-jurisdictional High Court does not alter the position. Therefore, I do not consider it permissible to rely upon the earlier decision of this Tribunal in Mali Ram's appeal strongly relied upon by the learned Counsel for the aggrieved borrowers/mortgagors.
Here I may also profitably refer to the following observations of the Apex Court made in Appeal (Civil) 4291 of 2002, Pradip J. Mehta v. Commissioner of Income-Tax, Ahmedabad, decided on 11.4.2008:
"24. Although the judgments referred to above, were cited at the bar in the - High Court, which were taken note of by the learned Judges of the Bench of the High Court, but without either recording its agreement or dissent answered the two questions referred to it in favour of the Revenue. Judicial decorum, propriety and discipline required that the High Court should, especially in the event of its contra view or dissent, have discussed the aforesaid judgments of the different High Courts and recorded its own reasons for its contra view. We quite see the fact that the judgments given by a High Court are not binding on the other High Court(s), but all the same, they have persuasive value. Another High Court would be within its right to differ with the view taken by the other High Courts but, in all fairness, the High Court should record its dissent with reasons therefore. The judgment of the other High Court, though not binding, have persuasive value which should be taken note of and dissented from by recording its own reasons."
So, the Hon'ble Supreme Court says that even if any High Court is to differ from a view on some point expressed by some other High Court the High Court differing with the other High Court's view should give reasons for not agreeing with the other High Court's views. Thus this tribunal even otherwise cannot ignore the view of Calcutta High Court.
For the same reason the S.A., of the present appellants is also liable to be rejected as being premature and, accordingly, this appeal is dismissed and the S.A. of the appellants stands rejected as being premature.