W. P. Nos. 11828, 12210, 11993, 11787, 5651 and 10048 (W) of 2015. Case: Jawahar Singh Vs United Bank of India. High Court of Calcutta (India)
| Case Number | W. P. Nos. 11828, 12210, 11993, 11787, 5651 and 10048 (W) of 2015 |
| Counsel | For Petitioner: Debajyoti Basu, Suvadip Bhattacharjee, Shambhu Nath Ray, Ms. Rupsa Chakraborty, Ms. Amrita Tewari, Suman Jaiswal, Ranjan Kali. Ms. Mitul Chakraborty, Arijit Bardhan, Debanik Banerjee, Ms. Paromita Sarkar, Srenik Singhvi, Ms. Sananda Ganguli, Shubrodip Roy, Satadeep Bhattacharya, Shambhu Mahato, Saroj Kumar Ghosh, Advs. and For ... |
| Judges | Dipankar Datta, J. |
| Issue | Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (54 of 2002) - Sections 14, 13(4), 17; Constitution of India - Article 226 |
| Citation | AIR 2015 Cal 306 |
| Judgement Date | August 06, 2015 |
| Court | High Court of Calcutta (India) |
Judgment:
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Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(hereafter the SARFAESI Act) is at the centre of controversy in all but one of these writ petitions, which have been presented by borrowers/a secured creditor seeking to challenge orders passed thereunder by the Chief Metropolitan Magistrate, Calcutta/the District Magistrates of various districts in the state (hereafter the CMM/DM, wherever referred to jointly). The writ petition that stands out from this group, without challenging the section 14 order operating in the field, challenges the action of dispossession following such an order. Since interpretation of section 14 would arise as a matter of necessity, these writ petitions shall be governed by this common judgment and order.
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Making a departure from the usual course of ascertaining the factual matrix of each writ petition first, I propose to record the submissions advanced in regard to the scope, effect and import of section 14 of the SARFAESI Act, the issues that would emerge for decision based thereon and my understanding of the law, and then I shall apply the law to each case separately.
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While arguing W.P. 11828 (W) of 2015, Mr. Basu, learned advocate for the petitioner was heard submitting that law had undergone a sea change in view of the decision of the Supreme Court reported in (2014) 6 SCC 1 (Harshad Govardhan Sondagar v. International Asset Reconstruction Pvt. Ltd.) and an application under section 14 of the SARFAESI Act cannot be disposed of by the CMM/DM granting the prayer for assistance without putting the borrower on notice. Considering such broad submission, Mr. Joy Saha, learned advocate was requested to assist the Bench as amicus curiae. Elaborate submissions have been advanced by Mr. Saha and I record my appreciation for the efforts put in by him.
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According to Mr. Saha, prior to amendment of section 14, law was fairly well-settled that the CMM/DM was under no obligation to give any notice either to a borrower or to any third party and that an order passed thereunder followed a non-adjudicatory process, which was purely executionary in nature. Reference was made by him to the decisions reported in AIR 2009 Madras 10 (Indian Overseas Bank v. M/s. Sree Aravindh Steels Ltd.), AIR 2010 Bombay 53 (M/s. Puran Maharashtra Automobiles, Aurangabad v. Sub-Divisional Magistrate, Aurangabad), and AIR 2010 Chhattisgarh 83 [Ramdas Agrawal v. Collector (District Magistrate) District Durg].
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It was, however, contended by Mr. Saha that with the advent of the amendments in section 14 and the decision in Harshad Govardhan Sondagar (supra), there has been a radical change in law. He urged that the Supreme Court in such decision while holding that the district magistrate is to give an opportunity of hearing to the lessees and to pass orders in conformity with the principles of natural justice has not indicated that such right of hearing is available only to the lessees/tenants and it would be to the exclusion of all other categories of aggrieved persons. To put it differently, Harshad Govardhan Sondagar (supra) does not make any classification between a pre-mortgage lessee and the borrower. The main plank on which the decision in Harshad Govardhan Sondagar (supra) is based is sub-section (3) of section 14 and the judgment cannot be read as confined only to a particular class; it should be read in a manner applicable to everyone against whom an order under section 14(1) would operate. He further urged that there could be no other example of different categories of persons affected by the same order being entitled to challenge such order before different fora and that, if it is held that only lessees/tenants would be entitled to approach the High Court either under Article 226 or 227 while other categories of aggrieved persons must challenge the order of the CMM/DM before the tribunal under section 17, it would create an anomalous situation: one category of persons aggrieved by the same order would have to challenge the same under section 17 and if unsuccessful, by preferring an appeal under section 18, and if further aggrieved, by challenging the appellate order under Article 226 or Article 227, while the lessees would be deprived of the tiers referred to in sections 17 and 18 and would only be entitled to challenge the order of the CMM/DM before the High Court under Article 226 or 227. According to him, although the intention of the legislature was to bring in force a piece of legislation that would ensure speedy recovery of secured debts, the principles of natural justice cannot be disregarded. In the changed circumstances, section 14 can be read to include hearing of a borrower, particularly when power is conferred on the CMM/DM to decide whether taking over possession of the secured asset, on the basis of the affidavit filed by the secured creditor, ought to be ordered or not.
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Referring to the point that a hearing ought to be granted by the CMM/DM before passing an order under section 14 of the SARFAESI Act, Mr. Saha adverted to the well-settled principle of law that unless a statute expressly or by necessary implication excludes the application of natural justice, the requirement to follow natural justice must be read in the statute and that an administrative order, visiting a person with civil consequences, ought to be made in conformity with principles of natural justice. Reliance was placed on the decisions reported in (1994) 5 SCC 267: (1994 AIR SCW 3329) [Rash Lal Yadav (Dr) v. State of Bihar], (2008) 14 SCC 151: (AIR 2008 SC (Supp) 308) [Sahara India (Firm), Lucknow v. CIT], (2007) 3 SCC 587: (AIR 2007 SC 777) (State of Maharashtra v. Public Concern for Governance Trust) and AIR 1967 SC 1269 (State of Orissa v. Binapani Devi).
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The decision reported in AIR 1978 SC 597 (Maneka Gandhi v. Union of India and Ors.) was further referred to by Mr. Saha for the proposition that if the duty to give reasonable opportunity could be implied from the nature of functions being performed by the authority, fairness would demand that an opportunity to show cause ought to be extended.
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The decisions reported in AIR 1966 SC 81(Dwarka Nath v. Income Tax Officer), (1990) 2 SCC 746: (AIR 1990 SC 1402) (Neelima Misra v. Harinder Kaur Paintal) and (2012) 10 SCC 353: (AIR 2013 SC 107) (State of Gujarat v. Gujarat RevenueTribunal Bar Association) were also relied on in support of the argument that while discharging the duty enjoined on the CMM/DM by the second proviso to section 14 to satisfy himself of the contents of the affidavit filed by the secured creditor and to pass suitable orders for taking possession, the duty to act judicially is implicit in the exercise of such power.
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Inviting attention to the decision reported in (2008) 15 SCC 517: (AIR 2008 SC 2834) (N. Padmamma v. S. Ramakrishna Reddy), Mr. Saha argued that the procedures laid down for deprivation of a person's right to property must be scrupulously followed.
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It was also argued relying on Harshad Govardhan Sondagar (supra), where sub-section (3) of section 14 had been considered in extenso, that an order passed by the CMM/DM under sub-section (1) of section 14 cannot be challenged before the tribunal under section 17 and the only remedy available to a person aggrieved by such order is to invoke the writ jurisdiction of the High Court under Article 226 or its power of superintendence under Article 227.
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Mr. Saha submitted that a hearing at the pre-possession stage would result in filtering of frivolous applications made by authorised officers of secured creditors, without causing undue delay and disadvantage to those secured creditors having genuine claims and the same would ultimately advance the cause of justice.
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Next, it was contended by Mr. Saha referring to Appendix IV appended to the Security Interest (Enforcement) Rules, 2002 (hereafter the 2002 Rules) that even before the amendments were effected in section 14, a person aggrieved had the right of approaching the relevant tribunal under section 17 before physical possession of the secured asset was taken. Measures under section 13(4) (excluding proceedings under section 14), according to him, commence with the issuance of a notice under Rule 8(1) of the 2002 Rules. Appendix IV suggests that the notice under Rule 8(1) is a post possession notice or a notice issued simultaneously with the taking of possession. The question that therefore arises is whether under the general scheme of the SARFAESI Act, any right or representation is available to a person aggrieved before possession of the secured asset is taken. He contended that this issue had been dealt with in the decisions reported in (2010) 8 SCC 110: (AIR 2010 SC 3413) (United Bank of India v. Satyawati Tondon) and (2011) 2 SCC 782: (AIR 2011 SC (Cri) 570) (Kanaiyalal Lalchand Sachdev v. State of Maharashtra). In both the cases, orders of the concerned district magistrates were challenged before possession was actually taken and the Supreme Court held that the person aggrieved has a right to approach the tribunal under section 17 of the Act. Thus, the observation in the decision reported in (2013) 9 SCC 620 (Standard Chartered Bank v. V. Noble Kumar) that an application could be made under section 17 only after physical possession had been lost, is contrary to the decisions in Satyawati Tondon (supra) and Kanaiyalal Lalchand Sachdev (supra).
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Finally, relying on the decision reported in (2007) 2 SCC 711: (AIR 2007 SC 1349) (ICICI Bank Ltd. v. Prakash Kaur), Mr. Saha urged the Court to lay down the law that a borrower cannot be dispossessed by the secured creditor by force and that if the secured creditor is resisted by the borrower while taking possession, he can be dispossessed only in accordance with law, meaning thereby taking recourse to section 14.
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Mr. Basu, learned advocate for the petitioner in W.P. No. 11828(W) of 2015, Mr...
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