IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.8704 of 2009 M/S PUNYARK TILES & ORS Versus UNION OF INDIA, DEBT RECOVERY TRIBUNAL & ORS For the petitioner:- Mr. Krishna Kr. Singh & Mr. Vikash Kumar, Advocates For the Union of India:- Mr. Rabindra Kr. Priyadarshi, Central Government Counsel For the U.C.O. Bank:- Mrs. Nilu Aggrawal & Mr. Manoj Kumar, Advocates ----------- 02 28.7.2009 The petitioner prays for quashing the order dated 1.5.2002 passed by the Presiding Officer D.R.T., Patna in O.A. Case No. 62 of 2001 which was filed by the Bank under Section 19 of Recovery of Debts due to Bank and Financial Institutions Act, 1993 (hereinafter referred to as the Act of 1993). The petitioner further prays for quashing the notice issued under Section 13 (4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act, 2002) issued by respondent no.4 (Authorized Officer United Commercial Bank). The facts of the case in short is as follows:- The petitioner No.1 is a firm and petitioner no.2 is one of its partner. The firm dealt in manufacturing of mosaic and glazed tiles. On 2 application of petitioners dated 18.3.1988 term loans of Rs. 1,40,000/- and cash credit limit of Rs. 1,28,000/- were sanctioned by United Commercial Bank, Jogbani Branch. Cash credit limit was sanctioned against raw materials, whereas term loan was sanctioned against hypothecation of plant and machinery. Petitioner no.2 further pledged his landed properties as by way of collateral security and deposited the original title deed. It is not in dispute that the petitioners failed to repay the loan as well as interest despite various opportunities. The U.C.O. Bank filed an original application being O.A. No. 62 of 2001 under Section 19 of 1993 Act for Recovery of Debts to the tune of Rs. 16, 33,611 up to 31.7.2001 with future interest @ 14% per annum with quarterly rests till their realisation. The petitioners who were defendant no.1 and 2, appeared but they did not file this written statement despite various adjournments and opportunities. As such under 12 (4) of D.R.T. Rules 1993 the application proceeded ex-parte. It is relevant to state that petitioner no.2 himself on behalf of the firm had acknowledged the liabilities of the applicant Bank to the tune of Rs. 3 2,45,991.55, Rs. 2,44,691.65 and Rs.2,44,691.55 in his letter written on 31.12.1994, 31.8.1996 and 8.6.1999 respectively. After considering the facts of the case, the Presiding Officer, Debt Recovery Tribunal held that the Bank is entitled to receive from defendants jointly and severally a sum of Rs. 16, 33,611 up to 31.7.2001 with future interest @ 14 % per annum with quarterly rests till the realisation. Furthermore, the Presiding Officer, D.R.T. ordered a certificate to be drawn accordingly in terms of Section 19 (22) of the Recovery of Debts Due to Bank and Financial Institutions (Amendment) Ordinance, 2000. Thereafter, the matter came before the Recovery Officer of D.R.T. for execution of the certificate and the proceeding was numbered as R.P No. 115 of 2002. The properties mortgaged/ hypothecated was attached and finally by order dated 17th February, 2009 the properties have been put for sale under second Schedule to the Income Tax Act, 1961 read with Section 29 of 1993 Act. Thereafter a notice was pasted on the properties pledged/ mortgaged as now belonging to the U.C.O. Bank, Jogbani, (Annexure-3). 4 Counsel for the petitioners has assailed the entire proceedings as well as Annexure-3. He submits that Annexure-3 has been passed under the SARFAESI Act, 2002 The petitioners submits that in view of proviso to Section 19 (1) introduced by amending Act 30 of 2004 in 1993 Act, the bank was obliged to file an application before the D.R.T., for withdrawing the pending cases for taking action under SARFAESI ACT, 2002. He states that it was mandatory for the Bank to file an application seeking permission to withdraw the earlier application pending before the D.R.T. under 1993 Act, for initiating proceedings under 2002 Act. He then submits that entire proceeding since 2004 is null and void. Mrs. Nilu Aggrawal, counsel for the U.C.O. Bank, states that petitioners failed to re-pay the debt of the Bank and as such the Bank had no option, but to file O.A. Case No. 62 of 2001, for Recovery of its debt. Despite providing various opportunities the petitioners have not appeared and as such an ex-parte order was passed in favour of the Bank to the tune of Rs. 16, 33,611 with future interest @ 14 % with quarterly rests till realization. She submits that a certificate was also drawn 5 accordingly, as per the aforesaid order. It is further submitted that recovery proceedings started by the R.P. No. 115 of 2002 and the mortgaged property/hypothecated property was attached and has been put on sale. She submits that at no point of time the petitioners had moved this Court either against the order passed in O.A. case or in the recovery process. She further states that the notice contained in Annexure-3 pasted on house was not published under the SARFAESI Act, 2002. The main issue is whether it was mandatory for the U.C.O. Bank to file an application before tribunal under proviso to section 19 (1) of 1993 Act, as amended by 2004 Act, seeking permission to withdraw the proceeding for taking action under the SARFAESI ACT, 2002. Before I advert to the issue and arrival submissions of the parties, it would be necessary to notice under Section 19 (1) of 1993 Act as amended by Act 30 of 2004. “Application to the Tribunal – (1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the tribunal within the local limits of whose jurisdiction,- (a) the defendant, or each of the defendants where there are more than one, at the time of 6 making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or (b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or (c) the cause of action, wholly or in part, arises: [ Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under the Act: Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under Sub- Section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application: Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this Sub-Section, it shall pass such orders after recording the reasons therefore.]” 1993 Act was promulgated to provide for 7 quicker and expeditious adjudication and recovery of debts due to Bank and Financial Institutions, and for matters connected therewith or incidental to it. Still acute need was felt for providing more teeth and assistance to the Banks and the Financial Institutions for speedier recovery of loans, as the country’s economy too got affected due to unpaid debts to its institutions, which at times were fraught with procedural delay. With aforesaid object in view also, SARFAESI ACT was enacted in 2002 for securitization and reconstruction of financial assets and quicker enforcement of security interest. The Act provided quicker and stringent measures for securing and realizing the debts. An amendment was brought in Section 19 (1) of the old Act 1993 in 2004, to take aid of the quicker process and securitization of interest by incorporating three provisos to it vide Amendment Act 30 of 2004. The first proviso to Section 19 (1) of 1993 Act enabled a Bank or a Financial Institutions to file an application before D.R.T. for withdrawing the case under 1993 Act for the purpose of taking a quicker action for securitization of its interest under SARFAESI ACT, 2002. The second proviso provided that in case such application is made, the same 8 would be disposed of within a period of 30 days. The aforesaid amendment provided an option to the Banks and Financial Institutions to take recourse under the 2002 Act, if they thought it beneficial and expedient to do so. It would appear from the bare perusal of the Ist proviso to Section 19 (1) of 1993 Act that the same is not couched in mandatory language. The proviso starts with the words “provided that the Bank and Financial Institution may with the permission of D.R.T. on an application made by a withdrawal application”. The word “may” provides option to the Bank either to pursue proceedings under the old Act, or to seek permission to withdraw the proceeding under the old Act for taking action under the new Act. The provision though beneficial is directory in nature and not mandatory. It is not incumbent upon the Bank that it has necessarily to file an application for seeking permission to withdraw the proceedings under the 1993, Act for taking action under 2002 Act. In view of the aforesaid findings and position of law, there is no merit in this application. The contention of the petitioners that the Bank 9 should necessarily have filed an application seeking permission to withdraw the proceeding under the old Act, for taking action under the new Act is not the correct interpretation of legislative intent and is accordingly rejected. So far as, the second point raised by the petitioners that the notice as contained in Annexure-3, pasted on his house under the SARFAESI ACT, 2002, is a mere bald statement without any material basis. The petitioners have not brought any material on record to show that the aforesaid notice has been pasted under SARFAESI ACT, 2002. As such the second submission is also devoid of merit and is rejected. Section 30 of 1993 Act provides of the appeal before the D.R.T. against order passed by Recovery Officer. It would be open to the petitioners to file an appropriate appeal, if so advised. With the aforesaid observations this application is dismissed. P.K. (Samarendra Pratap Singh, J.)