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Judgment
P.K. Bhasin, J
Recovery efforts of the appellant herein for the recovery of over 600 crores of 'public money' from the two respondents herein have been brought to a grinding halt by the Debt Recovery Tribunal, Lucknow (DRT), which is a creation of the statute brought into existence for ensuring speedy recoveries of 'public money' due to the Banks and other Financial Institutions from their defaulting borrowers, by an ex parte final order dated 6.2.2017 in the Securitisation Application No. 729/2016 filed before the DRT by the two respondents herein under Section 17(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 ('SARFAES Act' in short). The appellant is a Central Public Sector Enterprise under the Ministry of Power, Government of India and has been recognised as a 'Financial Institution' within the meaning of Sub-Section (m) of Sub-section (1) of Section 2 of the SARFAESI Act and it is fighting this legal battle to recover whopping sum of over 600 crores of rupees from respondent No. 1 herein to whom over 500 crores were lent during the period of 2009-2014 but when the time for re-payment came it defaulted leading to initiation of recovery proceedings under the SARFAESI Act at the instance of the appellant in its capacity as a 'secured creditor' since the repayment of loan facilities by respondent No. 1 was secured by way of mortgages created by respondent No. 1 by way of deposits of title deeds of its various properties. To begin with the accounts of respondent No. 1 were declared as Non Performing Assets (NPAs) followed by service of demand notice under Section 13(2) of SARFAESI Act and finally by initiating steps for taking over of physical possession of its secured assets and sale thereof. At that stage the learned Presiding Officer of DRT, Lucknow came forward as a God sent messenger to the rescue of defaulting borrower and by one stroke of pen he quashed all the measures which stood taken by the appellant under the provisions of SARFAESI Act.
How and in what manner the learned Presiding Officer of the DRT has provided a life line to the defaulting borrower of this case with a stroke of his pen can best be seen from a reading of the impugned order itself and, therefore, the same is being re-produced below:
"The S.A. has been moved under Section 17 of the SARFAESI Act, 2002 to set aside the notice dated 3.11.2016. The applicants have also prayed that possession notice dated 3.11.2016 as well as proceedings of possession be set aside.
The applicant-Company has stated in brief that they applied for financial assistant to the respondent-F.I. They were sanctioned Term Loan of Rs. 140.00 crores on 24.3.2008 and accordingly loan documents were executed on 22.5.2009. After execution of loan documents, they were sanctioned Terms Loan of Rs. 257.68 crores and accordingly the loan agreement was executed on 22.5.2009. Thereafter on 29.10.2010 an addendum to the loan agreement dated 22.5.2009 was executed and a further some of Rs. 257.68 crores was granted. Thereafter on 28.6.2013 in furtherance of loan agreement dated 22.5.2009, additional terms loan of Rs. 69.36 crores was granted. The loan was secured by way of charges created by the applicant-Company over the asset/security deposited in loan and secured documents. On 1.10.2015, the respondent-F.I. issued notice recalling the outstanding loan amounting to Rs. 564.63 crores. The applicant-Company replied the notice dated 27.10.2015 vide its letter dated 26.11.2015. Without considering the reply, the respondent-F.I. issued demand notice on 18.11.2015. The applicant made detailed objection under Section 13(3A) of the SARFAESI Act, 2002 on 14.1.2016. On 3.11.2016, the officials of respondent-F.I., reached site of applicant-Company and pasted the possession notice on wall of factory premises. Besides it, they handed over the possession notice to the Security Guard stationed there. After numerous discussions, the respondent-F.I. agreed to re-structure the project loan. No opportunity was given to the borrower to regularize the loan account. The action of respondent-Bank is arbitrary, unfair and incomplete denied of principle of natural justice. The applicants have prayed that possession notice, dated 3.11.2016 as well as the proceedings of possession initiated by the respondent-F.I. be set aside.
In spite of service on respondent-F.I., no objection has been filed in reply to the S.A.
It appears from the record that after the receipt of demand notice dated 18.11.2015, the applicant-Company replied/represented the demand notice dated 18.11.2015 through representation dated 14.1.2016 under Section 13(3A) of the SARFAESI Act, 2002. The said representation was not disposed of. It amount to non-compliance of Section 13(3A) of the SARFAESI Act, 2002. Since Section 13(3A) of the SARFAESI Act, 2002 has not been complied with by the respondent-F.I., hence, possession notice dated 3.11.2016 deserves to be set aside.
(Emphasis laid by me)
ORDER
The S.A. No. 929/2016 moved by the applicants is allowed ex parte, against the respondent-F.I. The possession notice dated 3.11.2016 as well as the proceedings of possession initiated by the respondent-F.I. is set aside. The respondent-F.I. is restrained from taking any coercive measure against the applicants in pursuance of demand notice issued on 18.11.2015. However, in order to recover its dues, the respondent-F.I. may proceed afresh against the applicants from the stage of issuing demand notice under Section 13(2) of the SARFAESI Act, 2002.
Let the file be consigned to record."
From a bare reading of this short order of the DRT it is clear and it was not disputed also by Mr. K. Venugopai, learned Senior Counsel for the appellant that the impugned order is an ex parte, final order and he also submitted that the appellant has consciously chosen the remedy of appeal by approaching this appellate Tribunal challenging the ex parte order instead of approaching the DRT with an application for setting aside of its ex parte order. Existence of this legal right of the appellant to approach this Tribunal by way of an appeal instead of approaching he DRT was not disputed also by Mr. Rajeeve Mehra, learned Senior Counsel for the respondents. In fact, very fairly Mr. Mehra at the outset conceded for the remand of the matter to DRT for a fresh time bound disposal of the S.A. but with an order of interim protection against the threatened dispossession of the respondents from the mortgaged assets as also their sale by public auction. Mr. Mehra did not support the casual manner in which the learned Presiding Officer of the DRT has dealt with this matter involving huge amount of public money. Responding to this concession being given by Mr. Mehra for the remand of the matter Mr. Venugopai submitted that even if the matter is ordered to be remanded it has to be remanded to DRT in Delhi and not to Lucknow DRT since as per the loan agreement itself both parties had conferred territorial jurisdiction upon the DRT at Delhi and that is why the appellant had decided to appeal against the impugned order instead of approaching the DRT and the existence of such a clause in the loan agreement, copy of which had been filed with the appeal and which was not being disputed by the respondents and, therefore, the matter can be straightaway referred to the DRT, Delhi for fresh disposal in accordance with law.
In my view, this appeal deserves to be allowed and the impugned order needs to be set aside. The learned Presiding Officer of the DRT has not even stated in the impugned order as to what really was the grievance of the respondents in their S.A. The relevant background facts at least as pleaded in the S.A. itself, which was running into more than 40 pages, ought to have been noticed even if the appellant had not entered appearance and filed its written statement. So, one can safely say that the respondents did not have any serious dispute to raise in their Securitisation Application or at least not worth pressing into service before the DRT. Therefore, it can also be said that this litigation was commenced by the respondents just for the heck of it without any tangible grievance to raise and only to prolong the inevitable viz. auction of their properties publicly by the appellant in exercise of its powers under SARFAESI Act and that intention of the respondents becomes clear from the circumstance that after raising objections against the demand notice under Section 13(2) they started luring the appellant into accepting a 'One Time Settlement' for a sum of Rs. 440 crore which amount was increased to little over 500 crores with simple interest @ 9% p.a. and also offered to pay the OTS amount in one-go but after succeeding in their efforts to defer the steps initiated by the appellant for taking over of possession of its secured/mortgaged assets because of initiation of OTS talks and acceptance of the OTS by the appellant vide its letter dated 21.9.2016 the respondents backed out. Despite all this apparent state of affairs the respondents have been showered upon a relief by the learned DRT, which has brought to a grinding halt the measures the appellant has taken under SARFAES 1 Act to recover over six hundred crores and which relief in the facts and circumstances of this case appears to be totally unmerited and it virtually defeats the very object for the enactment of SARFAESI Act at the hands of none other than the DRT itself.
The DRT has allowed the S.A. by an ex parte order on the sole ground, which was in fact not even pleaded by the respondents in their S.A. nor even pressed into service before this Tribunal, that their representation against the demand notice under Section 13(2) was not disposed of by the appellant and as noticed already it was argued before the DRT on 19.12.2016 that their objections were disposed of on 21.9.2016 and since that decision was taken beyond the period of fifteen days the same amounted to breach of the provision of Section 13(3A). Their grievance in the S.A. was that it had not been decided in accordance with law which meant that though it was disposed of but not correctly. How it was so was not even pleaded in the S.A. by the respondents. However, when the S.A. was taken up by the DRT on 19.12.2016 for the first time after notice to the appellant herein, which as per the proceedings of that date had not entered appearance despite having been served with the notice of the S.A., the submission made by the Counsel for the respondents herein, as noticed already also, was that the appellant herein had decided their representation dated 14.1.2016 against the notice under Section 13(2) on 21.9.2016, which was beyond the period of fifteen days prescribed for the disposal of objections against the notice under Section 13(2) and there was thus non compliance of Section 13(3A) of SARFAESI Act. The learned Presiding Officer had hastily accepted that submission without even caring to have even a cursory glance into the averments in the S.A. and the documents placed on record by the Security Applicants themselves. Accepting this submission to be correct the DRT had granted blanket stay in favour of the Security Applicants restraining the appellant-FI from proceeding under SARFAESI Act against the respondents herein. While granting this relief the DRT has failed to notice the judgments of Hon'ble Allahabad High Court, which is the jurisdictional High Court as far as the DRTs in the State of U.P. are concerned, wherein it has been held that petitions under Section 17 of SARFAESI Act can be filed only after losing possession of the mortgaged assets. One of such judgment is of a Division Bench. The record of the S.A. was sent for by this Tribunal and was perused. The S.A. in its entirety shows that it was not the case of the respondents herein that their representation under Section 13(3A) was disposed of on 21.9.2016 which was beyond the prescribed period of fifteen days. Learned Presiding Officer had accepted the submission made on behalf of the respondents and granted them injunction against their dispossession from mortgaged properties and sale of those properties without even bothering to go through the letter dated 21.9.2016, which was available on record before him. That document shows that vide that letter the representation against the notice under Section 13(2) was not rejected as had he had been persuaded to accept on 19.12.20216 but in fact it was a communication of the acceptance of the OTS which the respondents had submitted when the appellant had sought to take possession of the mortgaged assets. Vide that letter the respondents had been conveyed by the appellant its acceptance of the OTS for Rs. 440 crores, which, the respondents thereafter had failed to avail of and had rushed to DRT where they were successful in misleading the Presiding Officer on 19.12.2016 into accepting the incorrect case put forth that the representation to the notice under Section 13(2) was rejected on 21.9.2016 and the Presiding Officer also casually accepted that plea. The appellant has pleaded in this appeal that the respondents' representation was rejected on 29.1.2016 and that decision was duly communicated to them. The respondents have not filed any reply to the appeal nor their learned senior Counsel disputed this part of the appellant's case in appeal.
It appears that the respondents must have realised after the appellant herein had been proceeded against ex parte by DRT that they will not succeed on the plea taken on 19.12.2016 that their objections were rejected on 21.9.2016 and, therefore, they took a somersault and argued before the DRT that their objections were not considered and disposed of at all and this time while deciding the S.A. finally the learned Presiding Officer accepted that submission also and quashed the entire measures taken under SARFAESI Act by the appellant. Instead of asking the Counsel for the Security Applicants as to why it had earlier on 19.12.2016 been submitted before him that their objections were decided on 21.9.2016. Thus, the matter, which ought to have been handled with all the seriousness considering the fact that huge amount of public money was to be recovered by the appellant, has been dealt with by the learned Presiding Officer perfunctorily. Therefore, the impugned order cannot be sustained for all these reasons.
Recently this Tribunal has vide order dated 2.8.2017 set aside an order of the same DRT in Appeal (Sr.) No. 86/2017 arising out of S.A. No. 435/2016 DRT, Lucknow, ICICI Bank Ltd. v. M/s. NCML Industries Ltd. & Anr., on different grounds and one of the grounds was that this DRT had granted blanket stay in favour of the defaulting borrowers of that case ignoring the judgment of a Division Bench of Hon'ble Allahabad High Court, which is the jurisdictional High Court for the DRTs in the State of U.P. Same situation is staring in the facts of this case also. I am re-producing below the relevant paras from my said order in that case:
"14. 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., (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 re-produced 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 22.10.2012 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 clearly 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 there under 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 VIII (2013) SLT 313 : IV (2013) BC 407 (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. 527 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., III (2016) DLT (Cri) 148 (SC) : IV (2016) SLT 531 : 111 (2016) BC 405 (SC) : III (2016) CCR 64 (SC) : (2013) 9 SCC 620 which enumerates three situation in Paras 36.1, 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 reported in (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............"
Therefore, for this reason also the impugned order cannot be sustained. The learned Presiding Officer ought to have taken note of this binding precedent and then decided the SA.
So, agreeing with the submissions made from both sides I am also of the view that the S.A. needs to be taken up afresh for disposal after remand by the DRT in accordance with law and the observations made hereinabove.
This appeal is accordingly allowed and the impugned order is hereby set aside. The matter is remanded back to the DRT for disposal in accordance with law. However, considering the manner in which this matter involving over Rs. 600 crores has been dealt with, this Tribunal is constrained to order that now this matter shall be taken up by DRT, Allahabad for fresh disposal. The parties shall appear before the DRT, Allahabad on 31.8.2017 at 2 p.m.
Record of the DRT, Lucknow, which was requisitioned for the disposal of this appeal, be sent back immediately with a copy of this order and thereafter, the DRT, Lucknow shall transmit the entire record to DRT, Allahabad so as to reach there at least two days before 31.8.2017. As far as the interim relief is concerned, it will now be open for the respondents to request the DRT, Allahabad to consider their prayer for interim relief and if made, the same shall be dealt with in accordance with law uninfluenced by any observation made by DRT, Lucknow in the order dated 6.2.2017 which was under challenge in the present appeal and which now stands set aside.