AJN 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CRIMINAL APPELLATE JURISDICTION CRIMINAL WRIT PETITION NO.1640 OF 2008 International Asset Reconstruction Company Private Limited (acting in capacity as the Trustee of the IARC-BOB-01/07 Trust) having its registered office at 104, Ashoka Estate, 24, Barakhamba Road, New Delhi – 110 001 and Corporate Office at B-302, Citi Point, Andheri-Kurla Road, Andheri (East), Mumbai – 400 059, represented by its Assistant Vice President Mr. Aamod Datar. ) ) ) ) ) ) ) ) ) ) ) ) ... Petitioner Versus 1. The State of Maharashtra ) 2. Girish Amarchand Kapasi Proprietor M/s. Jay Vijay Exports, B-15, Patel Shopping Centre, Chandavarkar Road, Borivli (West), Mumbai – 400 092, and Factory at Gala No. 36, Ground Floor Vaishali Industrial Estate, Dahisar (West), Mumbhai – 400 068. ) ) ) ) ) ) ) ) ) AJN 2 3. Jasmine Amarchand Kapasi, M/s. Jay Vijay Exports, B-15, Patel Shopping Centre, Chandavarkar Road, Borivili (West), Mumbai – 400 092 and Factory at Gala No.36, Ground floor, Vaishali Industrial Estate, Dahisar (West), Mumbai – 400 068. ) ) ) ) ) ) ) ) ) ... Respondents Ms. Revati Mohite-Dere for the petitioner. Mr. S.R. Borulkar, Public Prosecutor with Mr. V.B. Konde- Deshmukh, A.P.P. for the State. CORAM : SMT. RANJANA DESAI & R.G. KETKAR, JJ. DATE ON WHICH THE ORDER IS RESERVED : 18TH JULY, 2009. DATE ON WHICH THE ORDER IS PRONOUNCED : 30TH SEPTEMBER, 2009. P.C.: 1. The petitioner is a Company incorporated under the Companies Act, 1956 and registered as a Securitization and Asset Reconstruction Company under the provisions of the Securitization and Reconstruction of Financial AJN 3 Assets and Enforcement of Security Interest Act, 2002 (for short, “the NPA Act”). Respondent 2 is the proprietor of M/s. Jay Vijay Exports. Respondent 3 is the wife of respondent 2. 2. It is necessary to give the gist of the case of the petitioner as stated in the petition. The Bank of Baroda had granted certain credit facilities in favour of respondent 2. Respondent 2 created security for the repayment of the facilities by way of hypothecation of the assets of respondent 2, which are more particularly described in the Deed of Hypothecation dated 27/12/2001 and 13/2/2002 and the Schedule annexed to the petition and marked as Ex-C. Respondents 2 and 3 created additional security by way of mortgage of immoveable properties owned by them by deposit of title deeds by Memorandum dated 25/10/2000, which was extended by Memorandum dated 13/2/2002. The said facilities were also guaranteed by respondents 2 AJN 4 and 3. Respondents 2 and 3 failed and neglected to pay the dues as per the agreement and the Bank of Baroda recalled the said facilities calling upon them to pay the entire dues which respondents 2 and 3 failed to do. The Bank of Baroda filed a suit in the Debts Recovery Tribunal (for short, “the DRT”) and also issued notice dated 30/12/2005 under Section 13(2) of the NPA Act calling upon respondents 2 and 3 to make payment of Rs.184.63 lakhs with interest. Since the notice was returned undelivered, the same was issued by way of publication in Free Press Journal and Navshakti on 10/3/2006. 3. By notice dated 23/9/2006, respondents 2 and 3 were called upon to hand over peaceful possession of the secured properties on the day and date mentioned in the said notice. However, when the authorized officer visited the premises for the purposes of taking physical possession thereof, respondents 2 and 3 refused to hand over the possession and instead assured that they would clear the dues at the earliest. AJN 5 4. Respondents 2 and 3, however, failed to keep their promise. They failed and neglected to pay their dues and/or hand over possession of the secured assets. Therefore, the Bank of Baroda filed an application under Section 14(1) of the NPA Act in the Court of the Chief Metropolitan Magistrate, Mumbai (for short, “the CMM”) being Application No.338/Misc./2007 (for convenience, “the said application”) for the purposes of taking actual and physical possession of the secured assets. 5. In the meantime, the Bank of Baroda by Deed of Assignment dated 31/1/2008 assigned the debt arising out of the facilities extended by it to respondent 2 together with all right, title and interest, benefit in and to the said facility together with any incidental right thereto including the assignment of and benefits under the financial instruments relating to the said facilities along with the underlying security in favour of the petitioner herein. The petitioner has, therefore, become the absolute owner AJN 6 of the said facilities and is the only person legally entitled to receive the repayment of the facilities or any part thereof from respondents 2 and 3 and to enforce the securities under the said facilities. 6. In view of the aforestated, on 13/6/2008, the petitioner filed an application before the CMM for substituting itself in place of and in stead of Bank of Baroda. The CMM vide order dated 7/7/2008 substituted the name of the petitioner in stead and in place of the Bank of Baroda in the said application. 7. On 25/7/2008, the CMM allowed the said application and directed the Assistant Registrar, Borivali Centre of Courts to take possession of the said assets of respondents 2 and 3 after issuing notice to them. When the authorized officer had gone to take possession of the secured assets on 12/10/2006, respondents 2 and 3 were present at the said properties. They promised the authorized officer to clear the outstanding dues at the AJN 7 earliest by giving proposal within two weeks from the said date. In view of the said assurance, the authorized officer took only symbolic possession of the said properties. These facts have been duly recorded in the panchanama dated 12/10/2006 prepared at the respective properties by the authorized officer of the Bank of Baroda. 8. The petitioner is aggrieved by order dated 25/7/2008 passed by the CMM on the said application to the extent it directs the Assistant Registrar to take possession of the secured assets after issuing notices to respondents 2 and 3. It is the case of the petitioner that such a notice defeats the very purpose of the NPA Act. According to the petitioner, it is contrary to the spirit of the NPA Act and is also in the teeth of the judgment of the Supreme Court in Transcore v. Union of India, AIR 2007 SC 712 followed by this court in M/s. Trade Well v. Indian Bank & Ors., 2007 (1) Bom. C.R. (Cri.) 783. Prayer (a) of the petition seeks setting aside of the impugned order to the extent it directs the Assistant Registrar to AJN 8 take possession of the secured assets only after giving notice to respondents 2 and 3 as being illegal and contrary to the provisions of the NPA Act. Prayer (b) of the petition seeks a direction to the CMM and/or to the Assistant Registrar to forthwith take possession of the properties of respondents 2 and 3 and hand over the same to the petitioner. Prayer (c) of the petition seeks necessary guidelines from this court, which can be followed by the CMM while passing the order under Section 14 of the NPA Act. 9. We have heard Ms. Mohite-Dere, learned counsel appearing for the petitioner and Mr. Borulkar, learned Public Prosecutor appearing for the State. Ms. Mohite- Dere submitted that the CMM has clearly misread the relevant provisions of the NPA Act. She submitted that it is well settled that at the stage of Section 14 of the NPA Act, no adjudication of any nature is done. The order under Section 14 of the NPA Act is ministerial in nature. The CMM has to only direct the police to render necessary AJN 9 assistance to the financial institutions to recover possession of the secured assets and remedy, if any, to the debtor to agitate his grievance about the merits of his case is provided under Section 17 of the NPA Act. It is only at that stage that the adjudication of the merits of the case can take place. She submitted that this view is taken by the Supreme Court in Transcore and has been followed by this court in M/s. Trade Well. Learned counsel submitted that the CMM has failed to take note of the said judgments and consequently fallen into a great error. Learned counsel furnished to us data of the number of cases which are pending in several courts. She submitted that the phenomenal pendency of the cases is indicative of the fact that learned Magistrates seized of these cases have failed to note the intention of the legislature in enacting the NPA Act. They have failed to note that at the stage of Section 14 of the NPA Act, no adjudication is necessary and, therefore, it is not necessary to issue notice to the debtor. She submitted that learned Magistrate has only to confirm that notice AJN 10 under Section 13(2) of the NPA Act is given by the creditor and reply, if any, has been considered and the result is intimated to the debtor. He has also to verify that the secured assets fall within his jurisdiction and whether Section 31 of the NPA Act excludes the application of Sections 13 and 14 thereof. Once that information is received and if he finds that the bank or financial institution has considered the reply sent by the debtor to the notice under Section 13(2) of the NPA Act and communicated to the debtor, the reasons for its rejection, he must proceed to pass order under Section 14(1) of the NPA Act. There is no notice contemplated to the debtor under Section 14 of the NPA Act. Learned counsel submitted that because in all cases, notices are issued to the debtors at the stage of Section 14 of the NPA Act, it has become impossible for the banks and financial institutions to recover possession of the secured assets. She submitted that the purpose of the NPA Act is thus frustrated. In support of her submissions, learned counsel also relied on the judgment of learned Single Judge of this AJN 11 court (A.S. Oka, J.) in Criminal Writ Petition No.161 of 2008 (Kotak Mahindra Bank Ltd. v. State of Maharashtra & Ors.), decided on 26/9/2008. 11. Mr. Borulkar, learned Public Prosecutor has supported Ms. Mohite-Dere. He requested the court to issue necessary guidelines. 12. Admittedly, notices issued by the CMM to respondents 3 and 4 have been served. Therefore, prayers (a) and (b) of the petition have become infructuous. In fact, because of this on 29/4/2009, learned counsel for the petitioner - Ms. Revati Mohite-Dere rightly made a statement that she is not pressing prayers (a) and (b). Once the main prayers are not pressed, the petition becomes infructuous. It is not possible for us to frame guidelines as requested by the petitioner because this is not a public interest litigation filed on behalf of the body of secured creditors or asset reconstruction companies. We must however note that prima facie we do find AJN 12 substance in the submissions of Ms. Mohite-Dere. The phenomenal pendency of applications under Section 14 of the NPA Act which is confirmed by Mr. Borulkar, learned Public Prosecutor is frightening. Perhaps in a properly constituted petition, points raised by Ms. Mohite-Dere can be examined and necessary guidelines can be issued. Such exercise, cannot be undertaken in the peculiar circumstances of this case which we have noted hereinabove. Hence, leaving all contentions raised by the petitioner open, the petition is dismissed as infructuous. [SMT. RANJANA DESAI, J.] [R.G. KETKAR, J.]