IN THE HIGH COURT OF JUDICATURE AT MADRAS DATE : 29.09.2008 CORAM THE HONOURABLE MR. JUSTICE S.J.MUKHOPADHAYA AND THE HONOURABLE MR. JUSTICE V.DHANAPALAN W.P. NO. 4048 OF 2008 Sri Manicka Vinayagar Spinning Mills rep. by Joint Managing Director Mr. Vetrivel Kannan 163, Nethaji Road Madurai 625 001. .. Petitioner - Vs - 1. Authorized Officer State Bank of India Circle Office Madurai. 2. State Bank of India rep. by its Branch Manager Tallakulam Branch 60, Alagar Koil Road Madurai 625 002. 3. The Chairman DRAT, Chennai. .. Respondent Writ Petition filed for the issuance of a writ of certiorarified mandamus calling for the records in on the file of the 3rd respondent in its order passed in MA (SA) No.98/2007 dated 20.09.2007 and consequently in IA No.1211/07 in MA (SA) 98/07 on 20.11.2007, quash the same and direct the respondent bank to permit the petitioner company to open and run the mill. For Petitioner : Mr. K.V.Subramanian, SC, for Mr. M. A.Abdul Wahab For Respondents : Mr. S.Sethuraman ORDER S.J.MUKHOPADHAYA, J. The petitioner has challenged the common order dated 20th Sept., 2007, passed by the Debts Recovery Appellate Tribunal https://hcservices.ecourts.gov.in/hcservices/ (hereinafter referred to as the 'Appellate Tribunal') and the consequential order of the Appellate Tribunal dated 20th Nov., 2007, in MA (SA)-98/07. By the first order (20th Sept., 2007), MA (SA-98/07 preferred by the bank was allowed setting aside the interim order passed by the Debts Recovery Tribunal, Madurai (hereinafter referred to as 'DRT') in IN No.162/07 in SA No.50/07 and remitted back the matter to DRT, Madurai for disposal of the appeal, SA No.50/07, after hearing the parties in accordance with law. Subsequently, the petitioner having filed an application for clarification of the said order dated 20th Sept., 2007, the Appellate Tribunal, by order dated 20th Nov., 2007, observed that no clarification was necessary in view of the reasoned order passed and, thereby, directed the DRT, Madurai, to dispose of the pending appeal. 2. At the time of hearing of the case, learned senior counsel for the petitioner (borrower) orally prayed for direction on respondents to allow the petitioner to run the management of the spinning mill, possession of which has been taken by the respondent, State Bank of India (hereinafter referred to as the 'Bank'). 3. It appears that the account of the petitioner (borrower) having become NPA, the bank issued notice u/s 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'NPA Act') giving details of the mortgaged property and after receipt of reply, due to failure of payment, took action u/s 13 (4) of the NPA Act. Possession notice was published in the newspaper on 17th June, 2007 and possession was taken by the Bank. 4. The borrower, thereafter, preferred appeal u/s 17 before DRT, Madurai, with petition for interim relief. The Presiding Officer, DRT, Madurai, by order dated 6th March, 2007, passed the following interim order :- "Taking into considerations, all the aforesaid facts and the present position of the workers, the following interim order is passed : (i) It is directed that the Respondent Bank to defer all further proceedings till 01.08.2007. (ii) The Respondent Bank is permitted to rests the symbolic possession and open the mill by handing over the possession to appellant immediately against the acknowledgement to enable the appellant company to run the business and to continue the industrial/commercial production activities by deploying the employees who are presently out of employment. (iii) The respondent Bank is directed to hand over the copy of inventory and copy of https://hcservices.ecourts.gov.in/hcservices/ securities particularly as mentioned in the possession notice dated 17.06.2007 against the acknowledgement of the appellant to enable him to run the business and to maintain all the securities in tact and in good condition. (iv) The appellant is hereby directed to deposit a sum of Rs.30 lakhs with the respondent Bank on or before 31.07.2007 and file a memo along with proof of deposit. (v) In the event of default of this conditional order by the appellant, this conditional order stands automatically vacated and the respondent Bank is at liberty to proceed further with symbolic possession rests with them, by invoking necessary provisions of the SARFAESI Act for taking over of the management. Call on 01.08.2007 in the open court hall for further proceedings." The Bank having preferred appeal, the Appellate Tribunal set aside the order by impugned order dated 20th Sept., 2007 and the petition for clarification was disposed of on 20th Nov., 2007. 5. A petition in M.P. No.2/08 was filed by the petitioner in this case for interim direction on respondent Bank to permit the borrower to open and run the mill as per clause (1) of impugned order dated 6th July, 2007, passed by DRT, Madurai. Learned senior counsel for the petitioner mainly focussed his argument on the issue that DRT and this Court has jurisdiction to allow a borrower to manage and run the industry, even if possession is taken by the bank. Learned senior counsel for the petitioner submitted that the borrower is not asking for possession of the mill. Even as per the prayer, the possession of the mill will be with the bank and no right "in presenti" is accrued in favour of the borrower. Under Rule 8 (2) of the SARFAESI Rules, the authorised officer can grant custody to any person. Placing reliance on Supreme Court decision in Transcore – Vs – Union of India reported in 2008 (1) SCC 125 :: 2006 (5) CTC 753., it was submitted that the Supreme Court held that possession of the authorised officer is that of a Court Receiver and the power of the authorised officer is wider than the Court Receiver. Therefore, in the said circumstances, it is submitted that it is quite legal for the DRT to grant interim stay. If at all an order is passed permitting the borrower to run the mill, it would not amount to delivering possession by the authorised officer to the borrower or divesting the bank from its right u/s 13 (4) by taking physical possession. 6. Learned counsel appearing on behalf of the bank referred to notice u/s 13 (2) issued on 24th Aug., 2006 to show that a sum of Rs.3,44,72,234.07 was due to the bank about two years back https://hcservices.ecourts.gov.in/hcservices/ and the petitioner was given sufficient time to pay the amount; but having failed to pay, action was taken u/s 13 (4). He also relied on Full Bench decision in M/s.Lakshmi Shankar Mills (P) Ltd. & Ors. - Vs – The Authorised Officer/Chief Manager, Indian Bank & Ors. (2008 (2) LW 381), and submitted that once possession of secured asset is taken by the secured creditor, redelivery of possession cannot be granted by the Tribunal by an interim order, which will amount to grant of final relief in the application under Section 17 pending consideration. Learned counsel appearing on behalf of the petitioner submitted that the Full Bench judgment in M/s.Lakshmi Shankar Mills (P) Ltd. & Ors. - Vs – The Authorised Officer/Chief Manager, Indian Bank & Ors. (2008 (2) LW 381), suffers from principle of sub silencio as it has not determined whether an interim order could be passed allowing the borrower to run the unit without giving redelivery of possession. He also relied on numerous decisions to suggest that the DRT has power to grant interim relief. 7. We have heard the learned counsel for the parties and noticed the rival contentions. In the present case, the only question required to be determined is whether in the facts and circumstances the Appellate Tribunal was right in interfering with the interim order passed by DRT, Madurai. 8. It is not in dispute that the Bank took action u/s 13 (4) and had taken possession. It has also not been disputed and as decided by the Full Bench in M/s.Lakshmi Shankar Mills (P) Ltd. & Ors. - Vs – The Authorised Officer/Chief Manager, Indian Bank & Ors. (2008 (2) LW 381), that by interim order redelivery of possession cannot be given back to the borrower. By interim order dated 6th July, 2007, DRT, Madurai, while directed the bank to defer all further proceeding, it also directed the bank to open the mill by handing over possession to the borrower. Such order being against law and decision of Full Bench of this Court in Lakshmi Shankar Mills case (supra), it was rightly set aside by the Appellate Tribunal. In the present case, the borrower never sought for relief to allow the borrower to run the mill. It is for the first time such prayer was made by filing a petition for interim relief in the present case. Section 13 (4) of NPA Act empowers the secured creditor to take recourse to one or more of the measures mentioned at clauses (a), (b), (c) and (d) of Section 13 (4). Under clause (a) of Section 13 (4), the secured creditor could take possession of the secured asset of the borrower, including right to transfer by way of lease, assignment or sale for realisation of the secured debt. Under clause (b), a secured creditor can take over the management of the business of the borrower including by way of transfer, lease, assignment or sale for realisation of the secured debt. The right of transfer by https://hcservices.ecourts.gov.in/hcservices/ way of lease, assignment or lease could be exercised only where substantial part of the business of the borrower is held as security for the debt. Under clause (c) of Section 13 (4), a person can be appointed by the borrower as manager to manage the secured asset, if possession has been taken over by the secured creditor. It can also issue notice in writing under clause (d) to any person, who has acquired any of the secured asset from the borrower and from whom any money is due or may become due to the borrower, to pay the amount to the secured creditor. 9. From the aforesaid provisions u/s 13 (4) it will be evident that possession or management of the business is taken over by the secured creditor u/s 13 (4) only with a view to realise the secured debt. If after taking possession the secured creditor is prohibited to act in terms of any of the clauses u/s 13 (4), it cannot recover the secured debt. If by way of interim order the bank is allowed to take possession under clause (a) of Section 13 (4), but not allowed to transfer the secured asset by way of lease, assignment or sale for realisation of the secured debt, it will render Section 13 (4) redundant and ineffective for all purpose. Further, the borrower cannot run the industrial unit without taking possession of the unit (secured asset). For permitting the borrower to run the unit he is to be allowed to enter into the premises of the industrial unit (secured asset) so as to run the unit. There is nothing like "symbolic possession" under clause (a) of Section 13 (4); a secured creditor, if takes possession of secured asset, it amounts to taking physical possession. In such a situation, if interim order is passed in favour of borrower for running an industrial unit (secured asset) by entering into the premises of the secured asset, it will amount to redelivery of possession of secured asset, which cannot be granted till it is decided by the DRT in the petition u/s 17 that the possession taken was against the NPA Act or rules framed thereunder. 10. We find no merit in the present case. The writ petition is accordingly dismissed. But there shall be no order as to costs. GLN Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1. The Authorized Officer State Bank of India Circle Office Madurai. 2. The Branch Manager State Bank of India Tallakulam Branch 60, Alagar Koil Road Madurai 625 002. 3. The Chairman DRAT, Chennai. • 1 cc to Mr. Setharaman, Advocate CC SR No. 55824 • 1 cc to Mr. M. A. Abdul Wahab, Advocate SR No. 55752 ORDER IN W.P. NO. 4048 OF 2008 GV(CO) SR/10.10.2008 https://hcservices.ecourts.gov.in/hcservices/