W.P. No. 12424 (W) of 2015. Case: Dimension Realtors Private Limited and Ors. Vs The District Magistrate, North 24 Parganas and Ors.. High Court of Punjab (India)
| Case Number | W.P. No. 12424 (W) of 2015 |
| Counsel | For Appellant: Joy Saha, Shubojit Saha and Zeeshan Haque, Advs. and For Respondents: Maloy Kr. Ghosh, Sr. Adv., Basudeb Mukherjee, S. Bhagat, Jayanta Mitra, Advocate General, Prasenjit Basu and Parikshit Basu, Advs. |
| Judges | Sanjib Banerjee, J. |
| Issue | Code of Civil Procedure, 1908 (CPC) - Order XVIII Rule 4; Constitution Of India - Articles 141, 226, 227; Income Tax Act, 1961 - Sections 142(3), 17(3); Industrial Disputes Act, 1947 - Sections 17(1), 17(2), 18(1); Recovery Of Debts Due To Banks And Financial Institutions Act, 1993 - Section 19; Securitisation And Reconstruction Of Financial ... |
| Citation | AIR 2016 Cal 100 |
| Judgement Date | September 23, 2015 |
| Court | High Court of Punjab (India) |
Order:
Sanjib Banerjee, J.
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After the statute has baffled many a court to express divergent views, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act in its amended form in Section 14 thereof falls for consideration. The immediate grievance of the petitioners is in the District Magistrate, North 24-Parganas having passed an order on May 29, 2015 by which the district superintendent of police has been requested "to provide police assistance to the secured creditors for taking possession of the secured assets..." The schedule of assets is appended to the order of the District Magistrate of May 29, 2015.
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The secured creditor, the second respondent herein, issued a notice to the first petitioner under Section 13(2) of the said Act of 2002 for the alleged failure of the first petitioner to repay a debt due of about Rs. 11 crore. Such notice was issued on November 27, 2014, to which the first petitioner replied on January 19, 2015. The grounds cited' by the first petitioner were rejected by the secured creditor's letter of February 23, 2015. The petitioners say that in apprehension of the measures that the secured creditor may resort to upon dismissing the first petitioner's reply to the notice under Section 13(2) of the said Act of 2002, the first petitioner instituted a suit in the Barasat court having jurisdiction over the secured asset against, inter alia, the secured creditor, seeking a decree for specific performance of the agreement by which the owner of the secured asset had promised to sell an identified space at the Axis Mall in Rajarhat to the first petitioner. The first defendant in such suit is the fourth respondent herein as the owner of Axis Mall. The present lessee of the space is another defendant to the Barasat suit. The petitioners claim that against a loan of about Rs. 10 crore obtained by the first petitioner from the; secured creditor, a sum of about Rs. 11 crore has been repaid. The more substantial ground urged by the petitioners, relevant for the present context, is that the order impugned is without jurisdiction, inter alia, as the nature of the order passed is not one contemplated under Section 14 of the said Act of 2002 and that the District Magistrate failed to exercise a duty imposed on him by the statute in such official not inviting the first petitioner to a hearing or indicating in the impugned order that he was satisfied that the conditions precedent to the exercise of authority under such provision had been complied with.
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In support of the petitioners' case, a judgment reported at 2014) 6 SCC 1 (Harshad Govardhan Sondagar v. International Assets Reconstruction Company Limited) is cited for the apparent recognition therein that upon receipt of a written request under Section 14 of the said Act, the Chief Metropolitan Magistrate or District Magistrate is obliged to conduct a full-fledged hearing on the merits of the secured creditor's claim upon notice to the borrower or any other person interested in the secured asset. The petitioners also rely on another recent judgment of the Supreme Court reported at (2013) 9 SCC 620 (Standard Chartered Bank v. V. Noble Kumar) wherein it has been observed that a person interested in a secured asset has no right to apply under Section 17 of the said Act of 2002 before a Debts Recovery Tribunal prior to being dispossessed from the secured asset. The petitioners contend that in view of such judgments, the impugned order could not have been passed without notice to the first petitioner and without hearing it.
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The petitioners claim that, in any view of the matter, there cannot be any doubt that a person affected or immediately likely to be affected by any measure taken by a secured creditor under Section 13(4) of the said Act has to be afforded a forum to seek redressal of the perceived wrong. The petitioners insist that in Section 14 of the said Act not expressly prohibiting a hearing before the Chief Metropolitan Magistrate or the District Magistrate there under and in the 2013 Amendment to the said Act incorporating the pointed items of adjudication in course of the Section 14 proceedings, a person likely to be adversely affected by any order that may be made by the appropriate official under Section 14 of the said Act has to be given notice and heard before any order to his prejudice or detriment may be made under such provision. The petitioners claim that though a recent judgment of this court has not followed the dictum in Harshad Govardhan Sondagar on its understanding that Harshad Govardhan Sondagar is not in consonance with previous judgments of the Supreme Court not noticed therein, when there is an issue as to the existence of the security or the validity of the security agreement, the rule as laid down in Harshad Govardhan Sondagar is binding as the previous cases of the Supreme Court apparently not noticed in Harshad Govardhan Sondagar did not deal with such aspect of the matter.
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It is in such context, despite the recent comprehensive pronouncement by this Court in a yet unreported judgment of August 6, 2015 in a batch of writ petitions led by W.P. No. 11828 (W) of 2015: (AIR 2015 Cal 306) (Jawahar Singh v. The United Bank of India), that the matter has to be assessed in some detail since some of the grounds urged by the petitioners herein in support of their case were, according to the petitioners, not canvassed in course of Jawahar Singh and not noticed in such judgment.
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The petitioners have also referred to several other judgments, including those reported at (2011) 2 SCC 782: (2011 AIR SCW 1194) (Kanaiyalal Lalchand Sachdev v. State of Maharashtra) and (2010) 8 SCC 110: (AIR 2010 SC 3413) (United Bank of India v. Satyawati Tondon), which, according to Jawahar Singh (AIR 2015 Cal 306), effectively rendered Harshad Govardhan Sondagar per incuriam. To be fair to the petitioners, they have willy-nilly traced the history of the statute as it has traversed through the highest Court of this country and received attention from the challenge to its vires to its operational efficacy in diverse comparable situations.
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According to the petitioners, the direction issued by the District Magistrate in the impugned order of May 29, 2015 is contrary to the authority available to such official under sub-sections (1A) and (2) of Section 14 of the said Act. The petitioners say that, in any event, the order does not disclose that the nine conditions introduced by way of the 2013 Amendment as the first proviso to Section 14(1) of the said Act had been complied with or that the District Magistrate had been satisfied by the contents of any affidavit that may have been filed by the secured creditor before him covering the nine aspects. The petitioners suggest that since Section 14 lets the might of the State loose on a secured asset which neither the borrower nor any other person interested in the secured asset may be capable of resisting, it is necessary that the exercise of the authority under such provision be strictly in terms thereof and not otherwise. As a corollary, the petitioners submit that the draconian outcome of an order under Section 14 of the said Act should prompt a court to read the principles of natural justice into such provision. At any rate, the petitioners assert that nothing in Section 14 excludes the operation of the principles of natural justice, whether specifically or by necessary implication. The petitioners insist that the introduction of the nine clauses by the 2013 Amendment and the use of the expression "after satisfying the contents of the affidavit pass suitable orders" in the second proviso to Section 14(1) of the said Act necessarily makes the exercise under Section 14 an adjudicatory process which will involve a hearing for a meaningful assessment of the contents of the affidavit that the secured creditor is required to file under the first proviso to sub-section (1) of that provision.
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The petitioners say that it is possible for an immovable property let out to another to be offered as a security by the owner thereof in connection with credit facilities obtained by the owner or any other. The petitioners suggest that it is equally permissible, under Section 65-A of the Transfer of Property Act, 1882, that, subject to the conditions recognised in such provision, a mortgaged property may be leased to another with the lessee being entitled to meaningfully enjoy the leasehold property and the incidents of the lease without fear of immediate dispossession by the secured creditor. The petitioners claim that in the instant case when there is no existence of any secured asset and the rights of the first petitioner therein are inchoate, it was incumbent on the District Magistrate to look into the facts asserted by the secured creditor before obliging the secured creditor with an illegal order of police assistance.
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The petitioners refer to Section 31(e) of the said Act of 2002 that makes the provisions of the statute inapplicable, inter alia, to a lease. The petitioners submit that every right in an immovable property is not capable of forming a security interest and cannot, in every case, be regarded as a security interest for the purposes of the said Act. According to the petitioners, the first petitioner has made a substantial payment for purchasing the agreed space at Axis Mall, but the first petitioner cannot be said to be the owner of such immovable property so as to be able to create security interest in respect thereof in favour of the secured creditor. The petitioners say that the secured creditor may have been satisfied with the security furnished by the first petitioner when obtaining the credit facilities, but the first petitioner was constrained to offer such security as was demanded by the secured creditor, though no security interest could legally have been created in respect of the imperfect rights of the first petitioner over the...
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