M/S. N.C.M.L. Indust... v. Debts Recovery Tribu...

Devendra Kumar Upadhyaya, J.:— Heard Sri. Jaideep Narain Mathur, learned Senior Advocate, assisted by Sri. Amarjeet Singh Rakhra, for the petitioners and Sri. Prashant Chandra, learned Senior Advocate, assisted by Sri. Prashant Kumar and Sri. Shyam Rai for the respondent No. 3-Bank.

2. Since for the purposes of deciding the issue which has arisen in this petition, the Court does not intend to dwell upon the factual aspects, with the consent of learned counsel appearing for the parties, this petition is being finally disposed of at the admission stage itself by the judgment and order which follows.

3. These proceedings instituted under Article 226 of the Constitution of India seek to assail the validity of an order dated 02.08.2017, passed by the Debts Recovery Appellate Tribunal, Delhi (as Incharge of Debts Recovery Tribunal, Allahabad) in Appeal No. 86 of 2017 which was preferred by the respondent No. 3-Bank challenging the order dated 27.02.2017, passed by the Debts Recovery Tribunal, Lucknow in Securitisation Application No. 435 of 2016, whereby the interim relief application moved by the petitioners-applicants was allowed and the respondent-Bank was restrained from taking physical possession of the secured assets during pendency of the Securitization Application; further providing that in order to recover its dues, the respondent-Bank may proceed afresh strictly under the provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (herein after referred to SARFEASI Act).

4. It appears that respondent No. 3-Bank had extended some financial facilities to the borrowing company (petitioner no. 1) to which petitioner No. 2 stood guarantor. For securing the repayment of its dues, respondent-Bank initiated proceedings under the relevant provisions of SARFEASI Act and accordingly a demand notice dated 23.11.2015 is said to have been issued under Section 13(2) of the said Act claiming a amount of Rs. 970,970,473.45/-. It has been stated that the said notice issued under Section 13(2) of the SARFEASI Act was resisted by the petitioners by way of making representation dated 20.01.2016 which was rejected by the respondent-Bank, vide its communication dated 09.02.2016. Thereafter, it appears that some additional representation dated 14.02.2016 was made by the petitioners to the respondent-Bank to reconsider the representation dated 20.01.2016, however, as has been averred by the learned counsel for the petitioners, the said representation dated 14.02.2016 was not replied.

5. Thereafter, a notice was issued under Section 13(4) of the SARFEASI Act which has been annexed at page 84 to the petition. The document annexed at page 84 of the petition describes itself as possession notice under SARFEASI Act and further describes that it is a possession notice for immovable and movable properties in terms of Section 13(4) of the SARFEASI Act, read with Rule 4(1) and Rule 8(1) of the Security Interest (Enforcement) Rules 2002 (herein after referred to as 2002 Rules). The notice further states that a notice was issued to the petitioners under Section 13(2) of the SARFEASI Act requiring the petitioners to repay the amount of Rs. 970,970,473.45/- along with further interest and other charges within 60 days and that the petitioners have failed to repay the amount as claimed by the respondent-Bank and hence, notice is being given to the petitioners as also the public in general that the authorized officer of the bank has taken “symbolic possession” of the immovable and movable properties in exercise of powers conferred under Section 13(4) of the Securitisation Act, read with Rule 4, Rule 8 and Rule 9 of 2002 Rules. By the said notice, the petitioners in particular and public in general were cautioned not to deal with the property and any dealings with the property will be subject to the charge of the Bank for the outstanding amount due.

6. The petitioners challenged the said symbolic possession notice issued by the respondent-Bank, under Section 13(4) dated 12.05.2016 and other measures taken under Section 13(2) of the Act by taking recourse to Section 17 of the SARFEASI Act and filing Securitisation Application No. 435 of 2016 before the Debts Recovery Tribunal, Lucknow. The prayer made in the said Securitisation Application preferred by the petitioners under Section 17 was to set aside the measures taken by the respondent-Bank, under Section 17(4) of the Securitisation Act and to restrain the Bank from obtaining possession or selling or disposing of the properties mentioned in the notice issued under Section 13(2) of the SARFEASI Act.

7. It has been stated by the learned counsel appearing for the petitioners that during pendency of the Securitisation Application, since the respondent-Bank attempted to take forcible actual possession of the mortgaged properties, an application for grant of interim relief was also filed in the month of October, 2016 before the Debts Recovery Tribunal, Lucknow.

8. From perusal of the record of this petition, it appears that on 06.02.2016, the Debts Recovery Tribunal passed an order rejecting the application dated 01.12.2016 moved by the respondent-Bank whereby the respondent-Bank had claimed that Securitisation Application moved by the petitioners was not maintainable. While passing the order dated 06.02.2017, the Debts Recovery Tribunal observed that since the respondent-Bank had taken measures by issuing possession notice on 12.05.2016 in terms of Rule 8(1) of the 2002 Rules, hence the same was a measure prescribed under Section 13(4) of the SARFEASI Act and as such the Securitisation Application would be maintainable. It has further been observed by the Debts Recovery Tribunal, Lucknow in the said order dated 06.02.2017 that since the notice dated 12.05.2016 describes itself to be a notice under Section 13(4) of the SARFEASI Act, read with Rule 4, Rule 8 and Rule 9 of 2002 Rules, hence respondent-Bank cannot claim that it had not taken the measures under Section 13(4) of the SARFEASI Act on the ground that actual physical possession had not been taken from the petitioners. It has further been observed by the Debts Recovery Tribunal in the said order that since the physical possession and symbolic possession are one and the same, hence Securitisation Application would be maintainable. The next date fixed was 09.02.2017 for arguments on the interim relief application moved by the petitioners.

9. It is noticeable that the respondent-Bank did not challenge the order dated 06.02.2016, passed by the Debts Recovery Tribunal, Lucknow whereby it was held that Securitisation Application moved by the petitioners was maintainable under Section 17 of the SARFEASI Act. The order which was challenged before the Debts Recovery Appellate Tribunal is not the order dated 06.02.2017; rather it is the order dated 27.02.2017, passed by the Debts Recovery Tribunal whereby the interim relief to the petitioners has been granted. The memorandum of appeal filed by the respondent-Bank is on record which contains a prayer clause, perusal of which would show that it is only the order dated 27.02.2017, passed by the Debts Recovery Tribunal, Lucknow which was challenged and not the order dated 06.02.2017.

10. In view of the fact that the respondent-Bank did not challenge the order dated 06.02.2017, passed by the Debts Recovery Tribunal, Lucknow whereby the Securitisation Application was held to be maintainable, it has been contended forcefully by the learned Senior Advocate appearing for the petitioners, Sri. Jaideep Narain Mathur that in absence of any challenge to the said order dated 06.02.2017, there was no occasion for the Debts Recovery Appellate Tribunal, while passing the impugned order, to have observed that the Debts Recovery Tribunal, Lucknow had entertained the Securitisation Application in the teeth of judgment and order of the Division Bench of this Court in the case of Sushila Steels v. Union Bank of India (Special Appeal No. 415 of 2014, decided on 23.04.2014), wherein it has been held that the proceedings under Section 17 of the SARFEASI Act would not be maintainable before ‘actual possession’ is taken.

11. It has, thus, been submitted by Sri. Jaideep Narain Mathur, learned Senior Advocate that once the Appellate Tribunal was of the view that the Securitisation Application preferred by the petitioners itself was not maintainable in view of the judgment of the Division Bench of this Court in the case of Sushila Steels (supra), there was no occasion for the Appellate Tribunal, while passing the impugned order, to have remanded the matter back to the Presiding Officer of the Debts Recovery Tribunal, Lucknow for disposal of the Securitisation Application. He has stated that the Debts Recovery Tribunal, Lucknow will be bound by the observations made by the Appellate Tribunal that the Securitisation Application itself would not be maintainable in absence of the ‘actual possession’ of the properties and hence remanding the matter for decision afresh on the Securitisation Application before the Debts Recovery Tribunal, Lucknow would not serve any purpose as the same will be an exercise in futility for the reason that the Debts Recovery Tribunal will have no option but to hold that the Securitisation Application is not maintainable.

12. Sri. Jaideep Narain Mathur, learned Senior Advocate also contended while canvassing the case of the petitioners that the Sushila Steels' case (supra) needs to be reviewed as this judgement appears to have ignored or misunderstood the principles laid down in various judgments pronounced by the Hon'ble Supreme Court, specially the judgments in the cases of Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311, Transcore v. Union of India, I (2007) BC 33 (SC), Standard Chartered Bank v. V. Noble Kumar, (2013) 9 SCC 620, United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110, Authorised Officer Indian Overseas Bank v. Ashok Saw Mill, (2009) 8 SCC 366, Kanaiyalal Lalchand Sachdev v. State of Maharashtra, (2011) 2 SCC 782 and the decision dated 30.03.2017, rendered by this Court in the case of Aum Jewels v. Jijaya Bank, Writ-C No. 13476 of 2017.

13. Opposing the writ petition, Sri. Prashant Chandra, learned Senior Advocate appearing for the respondent-Bank has stated that the facts and circumstances of the present case did not warrant remanding the matter back to the Debts Recovery Tribunal, however, so far as the impugned order passed by the Debts Recovery Appellate Tribunal whereby the interim order dated 27.02.2017 has been set aside is concerned, there is no illegality for the reason that the interim order passed by the Debts Recovery Tribunal, Lucknow, on settled principles of law, was not sustainable and has, thus, rightly been set aside by the Appellate Tribunal. He has also stated that in fact the maintainability of the Securitisation Application moved by the petitioners under Section 17 was not an issue before the Appellate Tribunal. The sum and substance of the arguments made by Sri. Prashant Chandra is that there are very limited grounds available before the Debts Recovery Tribunal to grant such blanket interim relief to the petitioners and no such grounds can be said to have existed which would have warranted the Debts Recovery Tribunal, Lucknow to have granted the interim relief of the kind which has been granted to the petitioners by passing the order dated 27.02.2017.

14. Sri. Prashant Chandra has taken the Court to the impugned order passed by the Appellate Tribunal, specially the portion where the judgment of Hon'ble Supreme Court in the cases of Satyawati Tondon (supra), Standard Chartered Bank (supra) and Assistant Collector of Central Excise Chandan Nagar, West Bengal v. Dunlop India Ltd., (1985) 1 SCC 260 : AIR 1985 SC 330 have been copiously quoted. He has, thus, stated that the SARFEASI Act has been enacted by the Central Legislature accepting the suggestions by various committies which proceeded to make the law when need was felt to enact a new Legislation for securitisation empowering the Banks and Financial Institutions to take possession of the securities and sell them without intervention of the Court.

15. The submission made by Sri. Prashant Chandra is, thus, that the SARFEASI Act gives the measures available to the secured creditor to ensure that the dues are recovered from the borrower who commits default, without any obstruction. He has, thus, stated that keeping in view avowed object of the SARFEASI Act, the Debts Recovery Tribunal under Section 17 had to be very cautious while dealing with the interim relief application which may be moved against the statutory measures taken by the secured creditors and should not exercise its discretion in a manner which would impede the process of recovery as the same would not be in public interest.

16. Sri. Prashant Chandra has further argued that the default committed by the petitioners is to the tune of approximately 100 Crore rupees and in such a situation, the facts and circumstances of the present case did not warrant the Debts Recovery Tribunal to pass the interim order dated 27.02.2017 putting blanket restrain on the respondent-Bank from taking possession of the secured assets. He has also drawn attention of this Court to the statement made on behalf of the petitioners before the Appellate Tribunal (which has been referred to in the impugned order passed by the Appellate Tribunal) that the grievance of the petitioners before the Debts Recovery Tribunal regarding non-compliance of Rule 8 of 2002 Rules was not that the ‘symbolic possession’ was taken on 13.05.2016 and citation of publication of the notice was sent to the Press on 12.05.2016 as has been observed by the Debts Recovery Tribunal, Lucknow; rather the case of the petitioners was that the Bank had taken ‘symbolic possession’ of the secured assets of the petitioners and that the Bank had not issued separate notices for immovable and movable assets and also that Section 13(4) was taken recourse to by the Bank without considering the additional representation against the demand notice issued under Section 13(2) of SARFEASI Act. It has, thus, been submitted that the ground on which the interim relief has been granted by the Debts Recovery Tribunal by passing the order dated 27.02.2017 does not appear to have been pressed by the petitioners and hence in fact the Debts Recovery Tribunal while passing the interim order has on its own enlarged the scope of the prayer made by the petitioners. The submission of Sri. Prashant Chandra is, thus, that without going into the issue relating to the maintainability of the Securitisation Application under Section 17 preferred by the petitioners, the writ petition deserves to be dismissed upholding the impugned order passed by the Appellate Tribunal whereby the order passed by the Debts Recovery Tribunal, Lucknow dated 27.02.2017 has been set aside.

17. The submissions made and legal arguments raised by the learned counsel appearing for the respective parties have been considered and the record of this petition has also been perused. Various judgments cited by the parties at par have also been taken into account.

18. As to whether remanding the matter to the Debts Recovery Tribunal by the impugned order would serve any purpose while the Debts Recovery Appellate Tribunal notices in its order the law laid down by the Division Bench of this Court in the case of Sushila Steels (supra), whereby it has clearly been held that the Securitisation Application under Section 17 of the SARFEASI Act would not lie till ‘actual possession’ of the secured assets is delivered to the secured creditor, is an issue which is writ large in this case and, thus, needs to be decided in these proceedings.

19. The Division Bench of this Court in the case of Sushila Steels (supra) has dealt with the issue as to whether the proceedings before the Debts Recovery Tribunal under Section 17 of the SARFEASI Act would be maintainable or not before the ‘actual possession’ is taken. The question posed by the said Division Bench in Sushila Steels (supra) for determination can be found in para 10 of the judgment which reads as under:

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 reported in (2013) 9 SCC 620 which enumerates three situation in para 36.1, 36.2 and 36.3.

20. The facts in the case of Sushila Steels (supra) were that the secured creditor had issued possession notice dated 22.10.2012 under Section 13(4) of the SARFAESI Act and on receiving the possession letter/notice dated 22.10.2012 the borrower had initiated proceedings before the Debts Recovery Tribunal by filing Securitisation Application under Section 17 of the SARFAESI Act, wherein secured creditor raised preliminary objection as to the maintainability of the Securitisation Application on the ground that the Application was not maintainable for the reason that the notice/letter dated 22.10.2012 did not constitute a measure as contemplated under Section 13(4) of the SARFAESI Act. The Securitisation Application preferred by the borrower under Section 17 was dismissed by the Debts Recovery Tribunal as not maintainable by means of the order dated 17.12.2012 which was challenged by the borrower-Sushila Steels in Writ Petition No. 148 of 2013 which, too, was dismissed by Hon'ble Single Judge on 21.01.2013. The judgment rendered by Hon'ble Single Judge dated 21.01.2013 became subject matter of an intra-court appeal which was decided by the Division Bench by means of its judgment and order dated 23.04.2014 whereby the Special Appeal was also dismissed.

21. Thus, the legal issue which has emerged in this case is akin to the legal issue which has been decided by the Division Bench of this Court in Sushila Steels (supra). After posing the question in para-10 of the judgment, the Division Bench has noticed that there exists a state of uncertainty as regards the remedy available to the aggrieved person in the light of the judgment of Hon'ble Supreme Court which dealt with law on the subject. The Division Bench has given answer of the question posed in the said case in para-10 itself and has categorically observed that mere issuance of possession notice becomes immaterial till the ‘actual possession’ is taken and that in some cases where there is resistance on the part of the borrower to deliver possession and on that basis, recourse to Section 14 is taken by the secured creditor, then in such a situation also the proceedings under Section 17 of the SARFAESI Act would not lie till the possession of the mortgaged property is delivered to the Bank.

22. The ratio laid down in Sushila Steels (supra) which can, thus, be deduced and inferred is that no Securitisation Application under Section 17 of the SARFAESI Act would lie at the behest of the borrower till the ‘actual physical possession’ of the secured assets is delivered to the secured creditor.

23. The Debts Recovery Appellate Tribunal in its judgment and order, which is under challenge in these proceedings, has not only referred to the Division Bench judgment of this court in the case of Sushila Steels (supra), but has also categorically recorded a finding that the Debts Recovery Tribunal has ignored the said judgment. It has also been observed that the case of Sushila Steels (supra) deals with the maintainability of the petition under Section 17 of the SARFAESI Act at the instance of defaulting borrower before taking over the possession of the mortgaged property by the secured creditor. After quoting copious extracts from the judgment in Sushila Steels (supra), the learned Appellate Tribunal has observed in the impugned order that the Debts Recovery Tribunal has not only entertained the Securitisation Application in the teeth of the said judgment of its jurisdictional High Court but has also granted blanket unconditional unmerited stay order on 27.02.2017 ignoring the binding nature of judgment of Sushila Steels (supra) which has laid down the legal position regarding the maintainability of the petition under Section 17 of the SARFAESI Act at the instance of defaulting borrower before losing physical possession of the secured assets. The relevant extract in this regard occurring in the impugned order passed by the Appellate Tribunal is quoted herein below:

“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” (Special Appeal No. 415 of 2014 decided on 23.04.2014), 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:—”

“15. The learned DRT had not only entertained the S.A. in the teeth of this judgment of its jurisdictional High Court and but also granted blanket unconditional unmerited stay on 27.02.2017 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.”

24. In my considered opinion, if the Appellate Tribunal was of the view that on the basis of law laid down by the Division Bench of this Court in the case of Sushila Steels (supra), the Securitisation Application preferred by the petitioners was not maintainable before the Debts Recovery Tribunal, that would have been the end of the matter, however, after having held so, there was no occasion for the Appellate Tribunal to have remanded the matter back to the Debts Recovery Tribunal for decision of the Securitisation Application. If in the view of the Appellate Tribunal, the Securitisation Application was not maintainable under Section 17 on the ground that the Securitisation Application under Section 17 was filed by the petitioners only against the order/notice issued under Section 13(4) taking notional/symbolic possession of the secured assets without actual physical possession having been delivered, the entire exercise to be now carried on by the Debts Recovery Tribunal in hearing and deciding the Securitisation Application in terms of the impugned order would be nothing but an exercise in futility.

25. Once the Appellate Tribunal has made observation as regards the maintainability of the Securitisation Application on the basis of law laid down in the case of Sushila Steels (supra), it is difficult to comprehend that the Debts Recovery Tribunal will have any option to exercise its discretion but to reject/dismiss the pending Securitisation Applications as not maintainable. If the Debts Recovery Appellate Tribunal intended to direct the Debts Recovery Tribunal to decide the Securitisation Application exercising its discretion by giving finding both on the facts and law, reference to judgment of Sushila Steels (supra) by the Appellate Tribunal appears to be redundant. However, once the Appellate Tribunal has referred the law laid down in Sushils Steels (supra) giving a finding that the Debts Recovery Tribunal, Lucknow has exercised its jurisdiction ignoring the binding nature of the judgment of this court in the case of Sushila Steels (supra), remittance of the matter before the Debts Recovery Tribunal, Lucknow by the Debts Recovery Appellate Tribunal, thus, appears to be unwarranted.

26. For these reasons, this Court is not and cannot be in agreement with the impugned order dated 02.08.2017, passed by the Debts Recovery Appellate Tribunal, so far as remanding the matter for decision to Debts Recovery Tribunal is concerned.

27. Having observed as above, considering the competing arguments raised by the learned counsel appearing for the parties in this case, some observations need to be made by this Court on the issue as to whether the Securitisation Application/petition under Section 17 of the SARFAESI Act would be maintainable at the instance of the defaulting borrower only after actual physical possession of the secured assets is delivered to the secured creditor or the same would be maintainable also in case the measures as contemplated in Section 13(4)(a) of the SARFAESI Act are taken i.e. notional/symbolic possession of the secured assets is taken by the secured creditor under the said provision.

28. There have been various occasions when the Hon'ble Supreme Court has had an opportunity to consider and interpret the scheme of the SARFAESI Act including the provision of Section 13 and remedial measures available in Section 17 of the said Act.

29. In Mardia Chemicals Ltd. (supra), which is a judgment by three Hon'ble Judges, Hon'ble Supreme Court has taken into consideration the inter play of Section 13(4) and Section 17 of the SARFAESI Act and has summarized what emerges from the different provisions in para 80 of the said report, which is quoted here under:

“80. Under the Act in consideration, we find that before taking action a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debt Recovery Tribunal. The above noted provisions are for the purposes of giving some reasonable protection to the borrower. Viewing the matter in the above perspective, we find what emerges from different provisions of the Act, is as follows:—

1. Under sub-section (2) of Section 13 it is incumbent upon the secured creditor to serve 60 days notice before proceeding to take any of the measures as provided under sub-section (4) of Section 13 of the Act. After service of notice, if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. In connection with this conclusion we have already held a discussion in the earlier part of the judgment. The reasons so communicated shall only be for the purposes of the information/knowledge of the borrower without giving rise to any right to approach the Debt Recovery Tribunal under Section 17 of the Act, at that stage.

2. As already discussed earlier, on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debt Recovery Tribunal.

3. That the Tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/interim order subject to the condition at it may deem fit and proper to impose.

4. In view of the discussion already held in this behalf, we find that the requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under Section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Such a condition is invalid and it is liable to be struck down.

5. As discussed earlier in this judgment, we find that it will be open to maintain a civil suit in civil court, within the narrow scope and on the limited grounds on which they are permissible, in the matters relating to an English mortgage enforceable without intervention of the court.

30. In conclusion 2 as enumerated in Mardia Chemicals Ltd. (supra), their Lordships of Hon'ble Supreme Court have said that on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property, it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal.

31. The Mardia Chemicals Ltd., however, does not discuss as to the availability of remedial measures under Section 17 of the SARFAESI Act in two distinct situations, namely, where symbolic/notional possession has been taken by the secured creditor by passing the order/issuing the notice under Section 13(4) of the Act and (2) where actual possession has been taken over by the secured creditor. This, judgment, however, states that on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property, it would be open for the borrower to take recourse to the remedy available under Section 17 of the Act.

32. At this juncture, what needs to be taken note of is that the distinction between the symbolic and physical possession has not been made in the SARFAESI Act. Their Lordships of Hon'ble Supreme Court in the case of Transcore (supra) have observed that possession is not an absolute concept; rather a relative concept and further that no dichotomy can be found in the SARFAESI Act between symbolic and physical possession. Para-53 of the Transcore (supra) is quoted as under:

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/FI obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/tribunals.

33. In Ashok Saw Mill (supra), their Lordships of Hon'ble Supreme Court have held in para-29 of the report that after Mardia Chemicals Ltd. (supra), the SARFAESI Act was amended and such amendments were made in order to give an opportunity to the borrower to approach the Debts Recovery Tribunal at any stage against any measure taken by the secured creditor under sub-section (4) of Section 13.

34. Paragraph 29 of the report in the case of Ashok Saw Mill (supra) is quoted hereunder:

“29. The said amendments were made in order to give an opportunity to the borrower to approach the DRT at any stage against any measure taken by the secured creditor under sub-section (4) of Section 13 which were not in conformity therewith and to have the possession of secured assets restored in the event such action was found to be invalid. At the same time, more power was given to the secured creditor to exercise control over the management of the business of the borrower which included the right to transfer by way of lease, assignment or sale of the secured assets for releasing the same”.

35. Their Lordships in the case of Ashok Saw Mill (supra) have also highlighted the purpose of providing remedy under Section 17 of the SARFAESI Act and have stated that to prevent misuse of powers under the SARFAESI Act and also to ensure that no prejudice is caused to the borrower, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 to file a petition before the Debts Recovery Tribunal. Para-35 of the judgment in Ashok Saw Mill (supra) is also relevant to be quoted which reads as under:

“35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the Banks or Financial Institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to make an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in Sub-Section (3) thereof.”

36. Para-39 of the judgment in the case of Ashok Saw Mill (supra) is also relevant to be quoted which runs as under:

“39. We are unable to agree with or accept the submissions made on behalf of the appellants that the DRT had no jurisdiction to interfere with the action taken by the secured creditor after the stage contemplated under Section 13(4) of the Act. On the other hand, the law is otherwise and it contemplates that the action taken by a secured creditor in terms of Section 13(4)) is open to scrutiny and cannot only be set aside but even the status quo ante can be restored by the DRT.”

37. Hon'ble Supreme Court in the case of Kanaiyalal Lalchand Sachdev (supra) while quoting Ashok Saw Mill (supra) with approval has held that the Securitisation Application would be maintainable even against the action under Section 14 of the SARFAESI Act for the reason that such action constitutes an action taken after the stage of Section 13(4). In the said judgment, it has also been observed that SARFAESI Act contemplates remedy for the defaulting borrower affected by an action under Section 13(4) of the Act by providing for an appeal before the Debts Recovery Tribunal. Para-22 of the judgment in Kanaiyalal Lalchand Sachdev (supra) is extracted herein below.

“22. We are in respectful agreement with the above enunciation of law on the point. It is manifest that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4) and, therefore, the same would fall within the ambit of Section 17(1) of the Act. Thus, the Act itself contemplates an efficacious remedy for the borrower or any person affected by an action under Section 13(4) of the Act, by providing for an appeal before the DRT.”

38. Sri. Jaideep Narain Mathur, learned Senior Advocate appearing for the petitioners has also brought to the notice of this Court an order dated 10.04.2017, passed by a Division Bench of Hon'ble High Court of Delhi in W.P. (C) 2966/2017, Vikram Bakshi & Company Pvt. Ltd. v. Housing Development Finance Corporation Ltd.. The order dated 10.04.2017, passed by Hon'ble High Court of Delhi is though an interlocutory order, however, the said order shows that the issue pending before the Hon'ble High Court of Delhi is the same which emerges in this petition. In the case pending before Hon'ble High Court of Delhi, the question formulated and considered by the Appellate Tribunal finds mentioned in the order dated 10.04.2017 which is extracted herein below:—

“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 Securitisation 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?”

39. The Hon'ble High Court of Delhi considering the submission made by learned counsel for the parties has observed that the question raised in the petition requires consideration.

40. The Division Bench while delivering the judgment in Sushila Steels (supra) has quoted the case of Standard Chartered Bank (supra). It is to be noticed that the observation made by their Lordships of Hon'ble Supreme Court in the case of Transcore (supra) to the effect that the dichotomy between symbolic and physical possession does not find place in the SARFAESI Act appears to have escaped notice of their Lordships in Standard Chartered Bank (supra). The relevant paragraphs of Standard Chartered Bank (supra) are quoted hereunder:

“26. 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. The submission that such a construction would deprive the borrower of a remedy under section 17 is rooted in a misconception of the scope of section 17.

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. 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.

28. 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.

36. Thus, there will be three methods for the secured creditor to take possession of the secured assets:—

36.1 (i) The first method would be where the secured creditor gives the requisite notice under rule 8(1) and where he does 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 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.

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 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 forwards 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.

37. In this connection, it is material to refer to the judgment in Mardia Chemicals (supra) wherein the Court was concerned with the legality and validity of the SARFAESI Act. The Court held the Act to be valid except Section 17(2) thereof as it then stood. In paragraphs 59, 62 and 76 of the judgment the Court in terms held that in remedy under Section 17 of the Act was essentially like filing a suit in a Civil Court though it was called an Appeal. It is also relevant to note that in the ultimate conclusions in paragraph 80 of the judgment this Court held in sub-para 2 thereof as follows:—

“80. (2). As already discussed earlier, on measures having been taken under sub-section (4) of Section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under Section 17 of the Act before the Debts Recovery Tribunal.”

The grievance of the respondent that it will be left with no remedy is, therefore, misplaced. As held by a bench of three Judges in Mardia Chemicals (supra), it would be open to the borrower to file an appeal under Section 17 any time after the measures are taken under Section 13(4) and before the date of sale/auction of the property. The same would apply if the secured creditor resorts to Section 14 and takes possession of the property with the help of the officer appointed by the Magistrate.”

41. After discussing the legal framework as provided under Section 13, 14 and 17 of the SARFAESI Act, it has been observed by Hon'ble Supreme Court that borrower is always entitled to prefer an appeal under Section 17 after the secured assets is handed over to the secured creditor. It has further been observed in para 37 of the said judgment that Section 13(4)(a) provides that secured creditor may take possession of the secured assets, however, it does not specify whether such a possession is to be obtained directly or by resorting to the procedure of Section 14. The Court further observed 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 secured assets is always a measure against which remedy under Section 17 is available.

42. Thus, the Standard Chartered Bank (supra) in para 36 of the report has summarized that there will be three methods for the secured creditor to take possession of the secured assets. The first method, as has been held in this case, is where the secured creditor gives notice under Rule 8(1) of 2002 Rules and no resistance from the defaulting borrower is offered and in that case authorized officer of the secured creditor will proceed to take steps as stipulated under Rule 8(2) onwards to take possession and thereafter he may proceed to auction the secured assets. Para 36 of the judgment mentions a second situation as a method available to the secured creditor to take possession of the secured assets. The third situation discussed in the said judgment is where the secured creditor moves under Section 14 of the Act and thereafter Magistrate after scrutinizing the application and recording satisfaction will authorize the subordinate officer to take possession of the assets. Hon'ble Supreme Court further proceeds to refer to the judgment of Mardia Chemicals Ltd. (supra) and opines that it would be open to the borrower to file an appeal under Section 17 at any time after the measures are taken under Section 13(4) and before the date of sale/auction of the property. It has further been observed that the same would also apply if the secured creditor resorts to Section 14 and takes possession of the property with the help of the officer appointed by the Magistrate.

43. From the aforesaid discussion of the judgments as referred to herein above, what is clear without doubt is that against any of the measures resorted to/taken under Section 13(4) of the SARFAESI Act, remedy of filing Securitisation Application/petition/appeal is available under Section 17 of the Act. Section 13(4) of the Act provides certain measures which are available to the secured creditor for recovering the secured debt. Clause (a) of Section 13(4) is only one of such measures according to which, the secured creditor will have a measure to take possession of the secured assets including the right to transfer by way of lease, assignment or sale. On issuance of notice under Section 13(4)(a) for taking over notional/symbolic possession of the secure assets, two situations may arise. The first situation may be where on issuance of such a notice/order under Section 13(4)(a), the defaulting borrower does not put any resistance and in such a situation the secured creditor will enter into the physical possession of the secured assets as well. Second situation would be where on issuance of notice/order under Section 13(4)(a) of the Act, defaulting borrower resists delivery of actual possession and in that eventuality the actual physical possession can be taken by the secured creditor by taking recourse to the provision of Section 14 of the Act.

44. Once the measure under Section 13(4)(a) is taken, further action of sale/auction etc. can be taken by secured creditor, however, for proceeding further for auction/sale of the secured assets, actual physical possession may not be necessary. If after taking symbolic possession by passing the order/issuing a notice under Section 13(4)(a) of the Act, the actual possession is not delivered to the secured creditor, even in that eventuality auction can take place and possession can thereafter be taken by taking recourse to the proceedings under Section 14 of the Act.

45. Thus, in case it is held that the remedy under Section 17 is available only after actual physical possession is taken and not in case of symbolic possession under Section 13(4)(a), the same may, in many cases, lead to an anomalous situation. Anomaly would be that after taking either symbolic possession or actual physical possession, though the property may be put to auction/sale and in both the situations and possession can be delivered to the auction purchaser either with or without taking recourse to the proceedings of Section 14 of the Act, however, in the first situation where only symbolic possession has been taken, the remedy would not be available under Section 17 whereas in the second situation where actual physical possession has been taken this remedy would be available, though the borrower may have the same kind of grievance or injury in both these situations.

46. At this juncture, observations made by Hon'ble Supreme Court in the judgment of Transcore (supra) may be reiterated wherein it has been noticed in unambiguous terms that the SARFAESI Act does not make any distinction between the symbolic and physical possession for the reason that the dichotomy between symbolic and physical possession does not find place in the Act.

47. A reference appears to be necessary to be made to another Division Bench judgment of this Court dated 30.03.2017 delivered in Writ-C No. 13476 of 2017, Aum Jewels v. Vijaya Bank, where the view taken by the Division Bench appears contrary to the view taken in the case of Sushila Steels (supra) in respect of remedy available under section 17 of the SARFAESI Act against the measures taken by the secured creditor by passing the order/issuing notice under section 13(4)(a) of the said Act.

48. In Aum Jewels (supra), the facts of the case were that after rejecting the objections filed by the borrower under section 13(3-A) of the SARFAESI Act, the secured creditor had issued a possession notice under section 13(4) on 06.03.2017. It is this possession notice under section 13(4) dated 06.03.2017, which was under challenge in Aum Jewels (supra). Before the Court in this case, an objection was taken by the secured creditor that the petitioners of the said writ petition had a statutory alternative remedy of filing an application under section 17 of the Act against an order passed under sub section 4 of section 13 of the Act, in view of the law laid by Hon'ble Supreme Court in the case of Satyawati Tandon (supra). Aum Jewels (supra) makes a reference to paragraphs 17 and 27 of Satyawati Tandon (supra) wherein it was held that if a person has any grievance against the notice issued under section 13(4) or action taken under section 14, then remedy by filing an application under section 17 (1) must be taken recourse to and that High Court must insist that before availing remedy under under Article 226 of the Constitution of India, a person must exhaust the remedies available under the relevant statute. Paras 17 and 27, which have been quoted in the case of Aum Jewels (supra) are quoted here under:

“17. There is another reason why the impugned order should be set aside. If respondent No. 1 had any tangible grievance against the notice issued under Section 13(4) or action taken under Section 14, then she could have availed remedy by filing an application under Section 17(1). The expression ‘any person’ used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule. It is thus evident that the remedies available to an aggrieved person under the SARFAESI Act are both expeditious and effective. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. 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 inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

27. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and SARFAESI Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection.”

(emphasis supplied)

49. On the basis of Satyawati Tondon (supra), the Division Bench in the case of Aum Jewels (supra) dismissed the writ petition filed by the petitioners therein on the ground of availability of statutory alternative remedy under section 17 of the Act. The relevant portion of the judgment of Aum Jewels (supra) is being quoted herein under:

“The aforesaid judgment of the Supreme Court in Satyawati Tandon emphasises that a borrower, a guarantor or any other person who may be affected by the action taken under Section 13(4) of the Act have an efficacious and effective statutory remedy of filing an appeal under Section 17 of the Act and, therefore, the High Courts should not overlook the settled law that a petition, in such circumstances, should not be entertained, particularly when matters relating to dues of Bank and other financial Institutions are involved. In fact in all such cases, the High Courts must insist that the alternative remedies under the relevant Statutes are first exhausted.

Thus, when the petitioners have a statutory alternative remedy of filing an appeal under Section 17 of the Act in which all the factual aspects can properly be examined, we do not consider it appropriate to examine these issues in the present petition. The petition is, accordingly, dismissed.”

50. Thus, in Aum Jewels (supra) the Division Bench of this Court dismissed the writ petition for the reason that for assailing an order/notice under section 13(4), remedial measures are available under section 17 of the SARFEASI Act. The ratio, therefore, in Aum Jewels (supra) which can be deduced is that against an action/measure taken by the secured creditor by issuing a notice/passing an order of symbolic possession under section 13(4) of the Act, remedy under section 17 is available and as such the securitisation application/petition filed under section 17 will be maintainable against such a measure under section 13(4)(a) of the Act.

51. The ratio or the principle of law enunciated in Aum Jewels (supra) thus, runs in conflict with what has been held in Sushila Steels (supra), wherein it has been held that appeal/application under section 17 will not be maintainable against an order/notice under section 13(4) issued by the secured creditor in case actual physical possession has not been taken. However, Aum Jewels (supra) does not draw distinction between the actual physical possession and symbolic possession for the purposes of availability of remedy under section 17 of the SARFAESI Act.

52. As observed above, their Lordships of Hon'ble Supreme Court in the case of Transcore (supra) have observed that dichotomy between symbolic and physical possession does not find mentioned in the SARFAESI Act.

53. In view of the discussion made above, while noticing the opposite views taken by two Division Benches of this Court in the case of Sushila Steels (supra) and in the case of Aum Jewels (supra), I find it appropriate to request Hon'ble the Chief Justice to refer this issue for decision by a Larger Bench. This Court is persuaded to refer this issue for decision by a Larger Bench not only because it notices divergent views taken by two Hon'ble Division Benches of this Court as aforesaid, but also for authentic pronouncement of law on the issue which has arisen in this case i.e. as to whether remedy under section 17 of the SARFAESI Act is available against an order/notice under section 13(4) of the Act only if actual physical possession of the secured assets is delivered to the secured creditor or such remedy is available in case where a notice has been issued or an order has been passed under section 13(4)(a) of the Act taking symbolic possession.

54. Hon'ble the Chief Justice is, therefore, requested to refer the following issue for determination by a Larger Bench of such strength of Hon'ble Judges as may be deemed fit and appropriate in the facts and circumstances of the case:

“In view of the observations made by their Lordships of Hon'ble Supreme Court in the case of Transcore (supra) that the dichotomy between symbolic and physical possession does not find place in the SARFAESI Act, which of the two Division Bench Judgements of this Court, either in the case of Sushila Steels (supra) or in the case of Aum Jewels (supra), enunciates the correct law so as to constitute a binding precedence on the issue as to whether remedy of filing appeal under section 17 of the SARFAESI Act is available against an order passed/notice issued under section 13(4)(a) of the Act for possession of the secured assets?”

55. Let the record of this case be placed before Hon'ble the Chief Justice for appropriate orders.

56. Since the question of law as discussed above, is being referred to a Larger Bench for determination, in my considered opinion, proceedings before the Debts Recovery Tribunal pursuant to the impugned order dated 02.08.2017 passed by the Debts Recovery Appellate Tribunal need to be stayed.

57. Accordingly, it is provided that the impugned order dated 02.08.2017 passed by the Debts Recovery Appellate Tribunal, as is contained in annexure no. 1 to the writ petition, shall remain stayed till further orders of this Court.