SCA/30989/2007 1/15 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 30989 of 2007 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA ===================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ===================================================== SURENDRA J KOTWAL - Petitioner(s) Versus ORIENTAL BANK OF COMMERCE THRO AUTHORIZED OFFICER - Respondent(s) ===================================================== Appearance : MR DEVANG D TRIVEDI for Petitioner(s) : 1, MR P.A.MEHD for Respondent(s) : 1, ===================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA SCA/30989/2007 2/15 JUDGMENT Date : 07/01/2008 ORAL JUDGMENT 1. The petition is taken up for final hearing and disposal today in light of the view that the Court is inclined to adopt. RULE. The learned advocate for the respondent-Bank is directed to waive service of rule. 2. The petitioner has prayed for following reliefs: 8.0 The petitioner in the aforesaid set of facts and circumstances prays that: A. The Hon'ble Court would be pleased to admit and allow the present Special Civil Application, B. The Hon'ble Court would be pleased to issue writ of certiorari and/or any other appropriate writ order or direction by quashing and setting aside the notice dated 28th August, 2004 issued under Section 13(2) of the SARFAESI Act, 2002 produced at “Annexure-C” to the petition as well as notice of possession issued under Section SCA/30989/2007 3/15 JUDGMENT 13(4) of the SARFAESI Act dated 19th February, 2005 produced at “Annexure-D” to the petition, being illegal arbitrary and without jurisdiction. C. The Hon'ble Court would be pleased to issue writ of certiorari or any other writ order or direction by quashing and setting aside illegal and arbitrary action and implementation of the notice issued under Section 13(2) and Section 13(4) of the SARFAESI Act, 2002 produced at “Annexure-C” and “Annexure-D” respectively, to this petition by declaring the same being arbitrary, illegal and without jurisdiction and authority. D. Pending hearing and final disposal of this petition, the Hon'ble Court would be pleased to restrain the respondent-Bank or its officers or its agents or its representatives from taking physical possession of the residential property belonging to the petitioner being situated at 2/B, Mahavir Society, Paldi, Ahmedabad or in the alternative the Hon'ble Court would be pleased to stay implementation and execution of the notice dated 28th August, 2004 as well as possession notice dated 19th February, 2005 and the order of the learned Chief Metropolitan Magistrate, Ahmedabad SCA/30989/2007 4/15 JUDGMENT dated 3rd December, 2007 by granting status quo order by directing the respondent-Bank and its agency/ police authority precisely from taking over physical possession of the property being situated at 2/B, Mahavir Society, Paldi, Ahmedabad wherein the petitioner along with his family members is residing. E. The Hon'ble Court would be pleased to grant status quo order. F. The Hon'ble Court would be pleased to pass such other order or orders as deemed necessary in the circumstances of the case, in the interest of justice. 3. The petitioner is the Chairman and Managing Director of a limited company, namely, M/s.Digital Multi Forms Limited (the Company). In 2002 the Company sought certain financial facilities from the respondent-Bank towards term loan, working capital and letter of credit. It appears that the Company had also availed of certain financial facilities from the Gujarat Industrial Investment Corporation (GIIC). The Company failed to discharge its outstanding liabilities qua the respondent-Bank as well as GIIC. SCA/30989/2007 5/15 JUDGMENT The GIIC had already initiated proceedings for recovery by way of Regular Civil Suit No.723 of 2005 filed before the City Civil Court, Ahmedabad. 4. Respondent-Bank issued notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Securitisation Act) on 28.08.2004 to the petitioner in the capacity of a guarantor. The petitioner sent a reply in the form of objections / representation which was served on the respondent- Bank on 27.10.2004. Thereafter, on 19.02.2005 the respondent-Bank took over symbolic possession of the property, namely, the secured asset. It is not necessary to enter into the description of the property for the present as there are averments and counter averments as to the correct description of the property. Subsequent to the symbolic possession respondent-Bank initiated proceeding under Section 14 of the Securitisation Act and the Court of Chief Metropolitan Magistrate, Ahmedabad vide order dated 03.12.2007 has ordered taking over possession of the property. The petitioner has challenged not only the SCA/30989/2007 6/15 JUDGMENT Notice issued under Section 13(2) of the Securitisation Act on the ground that there is violation of provisions of Section 13(3A) of the Securitisation Act, but also order dated 03.12.2007 passed under Section 14 of the Securitisation Act by challenging action under Section 13(4) of the Securitisation Act. One of the contentions is also based on provisions of Section 13(9) of the Securitisation Act vis-a-vis one half (½) of secured asset being available with GIIC as a security. 5. On behalf of respondent-Bank Affidavit-in- reply dated 7th January, 2008 has been tendered. The learned advocate for the respondent-Bank has submitted that the petitioner is entitled to avail of an alternative remedy under Section 17 of the Securitisation Act but considering the fact that symbolic possession was taken over on 19.02.2005 even the said right now stands abrogated by the limitation prescribed and hence, the petitioner cannot be permitted to agitate the said issue by way of approaching this Court in writ jurisdiction. It is submitted that in so far as the other issues are SCA/30989/2007 7/15 JUDGMENT concerned, namely, violation of provisions of Section 13(3A) of the Securitisation Act, the said provision cannot be applied to the facts of the case for the simple reason that on the date the Notice under Section 13(2) of the Securitisation Act was issued and the petitioner tendered reply Section 13(3A) of the Securitisation Act was not on the statute book. Therefore, there can be no violation of a provision which was non-existent at the relevant point of time. That in any view of the matter once symbolic possession had been taken over in exercise of powers under Section 13(4) of the Securitisation Act the only remedy that was available was preferring an appeal before the Tribunal as provided under Section 17 of the Securitisation Act. In support of the submissions the learned advocate for the respondent- Bank has invited attention to the following portion of the affidavit in reply. “12. With reference to paragraph No.3.5 and 3.6 of the petition, the respondent denies the contents thereof. It is pertinent to note that the notice under the Securitisation Act was issued in the SCA/30989/2007 8/15 JUDGMENT present case on 28.08.2004 and the reply thereto was purportedly given by the petitioner on 23.10.2004 and was received on 27.10.2004 by the respondent-Bank. It is pertinent to note that Section 13(3)(a) was inserted in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Act, 2002 vide the enactment of The Enforcement of Securities Interest and Recovery of Debts Laws (Amendment) Ordinance, 2004. The said ordinance along with the amendment to Section 13(3A) came into force on 11.11.2004. The respondent therefore submits that the said amendment came into force on a date which is after the whole process of notice and reply under the Securitisation Act had already concluded and, therefore, there was no scope of a reply by the respondent bank within seven days of the receipt of the reply from the petitioner. It is pertinent to note that The Enforcement Securities Interest and Recovery of Debts Laws (Amendment) Ordinance, 2004 itself speaks of the provisions of the Ordinance coming into force on 11.11.2004 itself and not with retrospective and retroactive effect, except for certain provisions stated therein. It is pertinent to note that Section 13(3A) which is Section 8 of the SCA/30989/2007 9/15 JUDGMENT amending ordinance is certainly not one of the provisions which comes into force with retrospective effect and therefore said Section 13(3A) of the Securitisation Act would not apply to any reply received by the respondent bank prior to 11.11.2004. The respondent submits without prejudice that even otherwise, the so called reply of the petitioner is not a document which can be termed as a “representation” or an “objection” within the meaning of the words in Section 13(3A) of the Securitisation Act and is, at best, a reply to the notice issued under Section 13(2) of the Securitisation Act and therefore there was no requirement of any reply under Section 13(3A) by the respondent-Bank. The respondent further submits that thereafter possession of the mortgage property was taken on 19.02.2005. The said property is sufficiently described in the possession notice. Thereafter public notices were also issued by the respondent bank in the local newspapers as required under the Securitisation Act. It thereafter came to the notice of the respondent that a typographical error had been made and the property in question was descrbied as “2A, Mahavir Society” in stead of “2B, Mahavir Society”. The respondent therefore served a SCA/30989/2007 10/15 JUDGMENT second notice on the petitioner dated 2/3/2005 which stated that the address of the property should be read as 2B, Mahavir Society wherever reference is made to 2A, Mahavir Society. The respondent also published a notice in the newspaper bringing notice of the said fact to the public at large. A copy of the said notice given to the petitioner as well as the notices published in the newspaper are annexed herewith and marked as ANNEXURE-A collectively. The aforesaid documents establish beyond doubt that the property mortgaged in fact the property of which the possession is taken over. It is pertinent to note that the petitioner has deliberately suppressed this fact from the Hon'ble Court and has made effort to misguide the Hon'ble Court by creating cloud of confusion and on the basis of this conduct alone the petition deserves to be dismissed with costs. It is also pertinent to note that at each and every place, be it the notice under Section 13(2) of the Securitisation Act, the possession notice, the panchnama, the public notices in the newspapers as well as the application filed before the learned Chief Metropolitan Magistrate under Section 14 of the Securitisation Act the property per se is sufficiently described and the only SCA/30989/2007 11/15 JUDGMENT discrepancy seems to be reference to property as 2A Mahavir Society at some places and 2B, Mahavir Society at other places. Even this discrepancy has already been clarified by the respondent-Bank in the notice to the petitioner as well as notice published in the newspaper and therefore there is no iota of confusion as to the identify of the property and therefore this typographical error cannot be used by the petitioner to claim that there is confusion as to the identity of the property. It is further apparent that as far as taking of possession is concerned, the respondent-Bank has taken possession of correct property. It is also pertinent to note that even the petitioner in its reply to the notice under Section 13(2) of the Securitisation Act has described the residence of the petitioner as being 2A instead of 2B, Mahavir Society, as stated in the petition itself and therefore “2A” and “2B” are routinely interchanged by the petitioner himself to describe the very same property. The respondent therefore submits that in the absence of any confusion of about the identity of the property, the contention of the petitioner regarding description of the property deserves to be rejected. Other contentions, allegations and averments made SCA/30989/2007 12/15 JUDGMENT in paragraph under reply are not true and hence denied.” 6. Technically, the learned advocate for the respondent-Bank is right in contending that on 27.10.2004 when respondent-Bank received the reply / objections / representation in response to Notice issued under section 13(2) of the Securitisation Act, Section 13(3A) of the Securitisation Act was not on the statute book. However, that fact by itself would not make any change in the settled legal position, namely, a secured creditor is required to deal with the reply / objections filed by the debtor in response to Notice under Section 13(2) of the Securitisation Act before taking any steps under Section 13(4) of the Securitisation Act. This has been laid down by the Apex Court in the case of Mardia Chemicals Ltd. and others V/s. Union of India and others 2004 (4) SCC 311. 7. Thus, whether one considers the law laid down by the Supreme Court or the statutory provisions, the position in law remains the same. A Secured creditor cannot initiate any action under Section 13(4) of the Securitisation Act without SCA/30989/2007 13/15 JUDGMENT dealing with the objections / representation raised by the debtor. In the present case, it is an admitted position that the respondent-Bank has failed to act in accordance with requirements of law despite the fact that the petitioner had tendered reply / objections / representation dated 23.10.2004 which was served on the respondent-Bank on 27.10.2004. Once this is the position, any action under provision of Section 13(4) of the Act cannot be sustained even if the symbolic possession was taken over in 2005. 8. Hence, without entering into the respective contentions in relation to various other issues raised by the parties it would meet ends of justice if the impugned proceedings including Notice under Section 13(2) of the Securitisation Act are quashed and set aside. It will be open for the respondent- Bank to initiate fresh action in accordance with law by issuance of a fresh Notice under Section 13(2) of the Securitisation Act, if so desired, and the facts and circumstances so warrant. 9. At this stage, it is necessary to record SCA/30989/2007 14/15 JUDGMENT that by virtue of issuance of Notice under Section 13(2) of the Securitisation Act, the petitioner was prevented from alienating the property in question in any manner whatsoever. However, now that the said Notice dated 28.08.2004 is being quashed and set aside, the learned advocate for respondent-Bank expresses an apprehension that the petitioner may alienate the property before any fresh action is initiated by the respondent-Bank in accordance with law. The learned advocate for the petitioner states, under instructions of the petitioner, who is personally present in the Court, that the petitioner shall not alienate the property in any manner whatsoever for a period of four weeks from today. 10. Accordingly, Notice dated 28.08.2004 issued under Section 13(2) of the Securitisation Act is quashed and set aside. As a consequence any proceedings pursuant to the said notice are also held to be bad in law. The petition is allowed accordingly in the aforesaid terms. Rule made absolute. There shall be no order as to costs. SCA/30989/2007 15/15 JUDGMENT (D.A.MEHTA, J.) ashish//