IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 16TH JUNE 2010 / 26TH JYAISTHA 1932 WP(C).No. 5590 of 2010(W) ---------------------------------------- AGAINST THE ORDER DATED / / IN SA.210/08 IN OA.236/2008 of DEBT RECOVERY TRIBUNAL, ERNAKULAM .................... PETITIONER(S): --------------- 1. N.A.SUGUNAN, S/O.AYYAPPAN, AGED 59 YEARS NEDUMATTATHIL HOUSE, KAVITHA ROAD, KACHERITHAZHAM, MUVATTUPUZHA. 2. K.SALILAM, W/O.N.A.SUGUNAN, AGED 50 YEARS, NEDUMATTATHIL HOUSE, KAVITHA ROAD, KACHERITHAZHAM, MUVATTUPUZHA. 3. D.SURESH, S/O.DAMODARAN, AGED 47 YEARS, CHERADIYIL HOUSE, NAGAPUZHA P.O., THODUPUZHA. BY ADV. SRI.THOMAS M.JACOB RESPONDENT(S): ---------------------------- 1. STATE BANK OF INDIA, REPRESENTED BY ITS MANAGER, THODUPUZHA BRANCH, THODUPUZHA, IDUKKI DISTRICT. 2. THE CHIEF MANAGER (CREDIT SUPPORT CELL) REGIONAL BUSINESS OFFICE, THIRUNAKKARA, KOTTAYAM. R1 & R2 BY ADV. SRI.K.K.CHANDRAN PILLAI THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 16/06/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMACHANDRA MENON, J --------------------------- W.P(C) No.5590 of 2010-W ---------------------------- Dated this the 16th day of June, 2010. J U D G M E N T Whether the Debt Recovery Tribunal is right in dismissing the application preferred by the petitioners to have joint trial of the O.A preferred by the Bank (for passing a decree in respect of the amount stated as due to the Bank) with the S.A preferred by the petitioner (challenging the SARFAESI proceedings taken by the Bank) is the point to be considered and decided in this case. 2. The sequence of events as narrated in the Writ Petition shows that, the petitioners had availed two loans from the respondent Bank. The first loan (housing loan) was availed by the petitioners 1 and 2, whereas the second loan, (vehicle loan) was availed by the third petitioner. The amount due to the Bank was not satisfied on time and since the petitioners continued to be defaulters, the Bank chose to file O.A No.236 of 2008 for realizing a total sum of nearly Rs.82 lakhs due under both the loans, on the strength of the security interest created over the property in question. The petitioners filed written statement mainly contending W.P(C) No.5590 of 2010-W 2 that the property of the first petitioner has been offered as security only in respect of the ‘housing loan’ and that the same has not been extended as security in respect of the ‘vehicle loan’ availed by the third petitioner. There is also another contention that, the third petitioner has not opted for any floating rate of interest and this being the position, the extent of liability fixed and sought to be realized is not correct or sustainable. 3. During the pendency of O.A, the Bank resorted to steps under the SARFAESI Act. The petitioners filed Ext.P1 application in the O.A No.238 of 2008 and Ext.P2 application in S.A.No.210 of 2008, seeking for joint trial of both the cases. The Bank filed detailed objections, as borne by Ext.P3, wherein it is contended that the scope of jurisdiction and scrutiny under Section 17 of the SARFAESI Act is very much limited and confined only to ascertain the correctness of the procedure and not with respect to any other matters and this being the position, joint trial cannot be entertained or allowed. 4. After considering the rival submissions, the Tribunal passed Ext.P4 order, whereby Exts.P1 and P2 applications for joint trial were rejected, stating that the scope of the two different W.P(C) No.5590 of 2010-W 3 proceedings was entirely different, which in turn is under challenge in this Writ Petition. 5. The learned counsel for the petitioners submits that, the stand taken by the respondent Bank and the reasoning given by the Tribunal for dismissing the petitions for joint trial are wrong and misconceived. It is stated that the scope of the jurisdiction under Section 17 is very wide in view of the specific observations made by the Apex Court in Mardia Chemicals V. Union of India (2004(2) KLT 273), wherein it is held that: “33. Taking an overall view of the rival contentions of the parties, we feel the main questions which broadly fall for consideration by us are: i) Whether it is open to challenge the statute on the ground that it was not necessary to enact it in the prevailing background particularly when another statute was already in operation? ii) Whether provisions as contained under Section 13 and 17 of the Act provide adequate and efficacious mechanism to consider and decide the objections/disputes raised by a borrower against the recovery, particularly in view of bar to approach the civil court under Section 34 of the Act? iii) Whether the remedy available under Section 17 of the Act is illusory for the reason it is available only after the action is taken under S.13(4) of the Act and the appeal would be entertainable only on deposit of 75% of the claim raised in the notice of demand? W.P(C) No.5590 of 2010-W 4 iv) Whether the terms or existing rights under the contract entered into by two private parties could be amended by the provisions of law providing certain powers in one sided manner in favour of one of the parties to the contract? v) Whether provision for sale of the properties without intervention of the court under Section 13 of the Act is akin to the English mortgage and its effect on the scope of the bar of the jurisdiction of the civil court. vi) Whether the provisions under Ss.13 and 17(2) of the Act are unconstitutional on the basis of the parameters laid down in different decisions of this Court? vii) Whether the principle of lender’s liability has been absolutely ignored while enacting the Act and its effect? 59. We may like to observe that proceedings under Section 17 of the Act, in fact are not appellate proceedings. It seems to be a misnomer. In fact it is the initial action which is brought before a Forum as prescribed under the Act, raising grievance against the action or measures taken by one of the parties to the contract. It is the stage of initial proceeding like filing a suit in a civil court. As a matter of fact proceedings under Section 17 of the act are in lieu of a civil suit which remedy is ordinarily available but for the bar under Section 34 of the Act in the present case.” 6. Reliance is also sought to be placed on the decision rendered by the Apex Court in Authorised Officer, Indian Overseas Bank and another V. Ashok Saw Mill (2009) 8 SCC 366) . The relevant portion of the judgment is extracted below: W.P(C) No.5590 of 2010-W 5 “14. It was also urged by the Senior Advocate that the Tribunal could not entertain a debate on the question whether the debt had become due or not because the SARFAESI Act proceeds on the basis that the liability is crystallised and the debt becomes due the moment action under Section 13(4) is taken and a security interest is also created in the secured assets. It was also observed that while the DRT is entitled to consider whether the possession of the secured assets had been taken in accordance with the SARFAESI Act and the Rules framed thereunder, once the liability stood crystallised it could no longer be adjudicated upon by the DRT. 34. The provisions of Section 13 enable the secured creditors, such as banks and financial institutions, not only to take possession of the secured assets of the borrower, but also to take over the management of the business of the borrower, including the right to transfer by way of lease, assignment or sale for realising secured assets, subject to the conditions indicated in the two proviso to clause (b) of sub-section (4) of Section 13. 35. In order to prevent misuse of such wide powers and to prevent prejudice being caused to a borrower on account of an error on the part of the banks or financial institutions, certain checks and balances have been introduced in Section 17 which allow any person, including the borrower, aggrieved by any of the measures referred to in sub-section (4) of Section 13 taken by the secured creditor, to take an application to the DRT having jurisdiction in the matter within 45 days from the date of such measures having taken for the reliefs indicated in sub-section (3) thereof. 36. The intention of the legislature is, therefore, clear that while the banks and financial institutions have been vested with stringent powers for recovery of their dues, safeguards have also been provided for rectifying W.P(C) No.5590 of 2010-W 6 any error or wrongful use of such powers by vesting the DRT with authority after conducting an adjudication into the matter to declare any such action invalid and also to restore possession even though possession may have been made over to the transferee.” The Tribunal has to adjudicate all the relevant issues in connection with the dispute involved, particularly in view of the fact that the jurisdiction vested to the Tribunal is after ousting jurisdiction of the Civil Court under Section 34 of the Act. 7. The learned counsel for the petitioners submits that the proceedings intended to be pursued before the DRT clearly show that an enquiry has to be conducted before adjudication, which involve raising of necessary pleadings as well as adducing evidence. As such, this can’t be made an empty formality, by merely examining the correctness as to the steps being pursued by the Bank. Reference is also made to the observations made by the Division Bench of this Court in Fakrudheen Haji V. State Bank of India (2009(1) KLT 227), wherein the findings and observations made by the Court have been summarized as follows: “(i) S.17 of SARFAESI Act, 2002 empowers any person to make an application to the Debt Recovery Tribunal against measures u/S. 13(4) of the Act. W.P(C) No.5590 of 2010-W 7 (ii) Expression “evidence produced by the parties” occurring in S.17(3) would include evidence adduced by a person other than the borrower. (iii) Expression “pass such order as it may consider appropriate and necessary” occurring in S.17(3) indicate ample powers to the Tribunal to deal with any situation.” 8. This Court had an occasion to consider the scope and jurisdiction of the DRT under such circumstances in Bhuvanendran V. L.I.C Housing Finance Ltd. (2009(4) KLT 72). Para 6 and 7 therein read as follows: “6. Coming to the scope of challenge against the action being pursued by the secured creditors, the rights and liberties of the parties concerned, particularly the borrowers are very much liable to be adjudicated before the Debt Recovery Tribunal S.17(1) is extracted below: Right to Appeal: (1) Any person (including) borrower), aggrieved by any of the measures referred to in sub- s.(4) of S.13 taken by the secured creditor or his authorized officer under this Chapter, (may make an application along with such fee, as may be prescribed) to the Debits Recovery Tribunal having jurisdiction in the matter within forty-five days from the date of which such measures had been taken. 7. It is quite obvious from the above provision that, any person including the borrower aggrieved by any of the measures referred to in sub-s(4) of S.13 is entitled to approach the DRT in the manner as W.P(C) No.5590 of 2010-W 8 specified therein. This being the position, the borrower, whether or not projected his grievance before the Bank/secured creditor by filing any statement of objection, in response to the notice availing opportunity provided under S.3A, can however challenge the matter before the DRT on all points including the actual liability to be discharged by him so as to redeem the property concerned. This is more so, when the jurisdiction of the other Forum including the Civil Court specifically barred, by virtue of the stipulation under S.34, where it is specifically mentioned that no Civil Court shall have the jurisdiction to entertain any suit or proceeding in respect of any matter, which the Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any Court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act or under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, It is provided under S.35, that the provisions of the SARFAESI Act, will have ‘overriding effect’ on other laws in existence.” The only apprehension of the petitioners is that, in spite of the observations made by the Tribunal and the steps taken by the Bank, the specific dispute/contentions raised before the Tribunal may not be properly considered, which hence is under challenge before this Court. 9. The learned counsel for the Bank submits with reference to the sequence of events, that the course and proceedings being pursued by the petitioners can’t but be deprecated, in so far as the W.P(C) No.5590 of 2010-W 9 petitioners are trying to protract things by filing I.As one after the other. It is also stated that the petitioners offered to satisfy the entire liability at the earliest possible opportunity, but the same was not honour. It was in the said circumstances, the Bank was constrained to proceed with the steps under the relevant provisions of law. It is also stated that, the original loan was secured by the petitioners from the Canara Bank, which however was subsequently taken over by the respondent Bank, giving wider facilities to the petitioners to the permissible extent, on the strength of the same security. But letter of confirmation extending creation of security interest was given only by one of the petitioners, under which circumstance, there was no other alternative for the Bank, but to file the O.A before the Tribunal; lest the proceedings should get barred by ‘limitation’. 10. Placing reliance on the law declared by the Apex Court in M/s.Transcore V. Union of India (AIR 2007 SC 712), the learned counsel for the Bank submits that the rights and liberties of the Bank to proceed with the steps under the SARFAESI Act, notwithstanding the proceedings pending before the DRT or elsewhere, stands settled. This being the position, the steps taken W.P(C) No.5590 of 2010-W 10 by the Bank resorting to the remedy under the SARFAESI Act are not liable to be clubbed with the case put forth in the O.A pending before the DRT and the petitioners are at liberty to challenge the steps availing the remedy under the SARFAESI Act. But the prayer to have joint trial is not liable to be entertained and as such, the petitions filed for joint trial, have been rightly dismissed by the Tribunal, submits the learned counsel. 11. Going by the contents of the impugned order, the Tribunal has observed as follows: “5. Following the submissions made by the learned counsel for the both the parties, this Tribunal analysed all the relevant aspects of the matter. It is pertinent to mention here that the RDDBFI Act, 1993, and the SARFAESI Act, 2002 are two different Acts and different set of rights and reliefs have been given under these Acts. Under the RDDBFI Act, 1993, the DRT has to decide the claim of the applicant bank and whereas under the SARFAESI Act, 2002, the borrowers/aggrieved persons have the right to initiate the proceedings before the Tribunal and in such an event, the DRT has limited jurisdiction only to test the correctness of the procedure/steps taken by the secured creditor under the SARFAESI Act, 2002. It is to be noted that S.17 of the SARFAESI Act, 2002 has conferred a specific jurisdiction upon the Tribunal and the said Section very categorically lays down the extent of exercise of jurisdiction ie, testing the correctness of the procedure initiated under S.13(4) of the said Act, by the secured creditor. Hence the area of legal field of both the Acts is different. Both the Acts are not only procedural Code but substantial rights of the parties are declared under both the Acts. As such, it cannot be said that the issues involved under both the proceedings are one and the same. W.P(C) No.5590 of 2010-W 11 6. Therefore, as the field of both the Acts is different, it would not be proper as well as legal to grant the relief sought for in this I.A. As stated, the frame and the scheme of both the legislations are entirely different. The decision rendered by the Hon'ble Apex Court in the landmark judgment in M/s.Transcore's case is worth recalling here in this contex. It has been observed in the said judgment at various stages that the SARFAESI Act, 2002 proceeds on the basis that the liability of the borrower to pay has crystalised; that the debt has become due. Whereas the RDDBFI Act provides for adjudication of the disputes. Proceedings under one statute cannot mix with other statute and such mixing is against the intention of the legislature. Therefore, the contentions of the petitioner is quite unsustainable and this IA is only to be dismissed. 7. Incidentally, it is also observed that the apprehension of the petitioners that unless joint trial is allowed, they may not be able to produce the original set of documents in support of their case is very much imaginary. It is made clear that the petitioners can always rely on the set of documents produced, whereever relevant and required. This Tribunal hereby permits both the parties to rely on their respective documents and other evidences. And all these documents can be called for perusal, evidence and taking judicial notice as and when necessary and required, so as to have a fair and proper adjudication of the issues involved.” From the observation made by the Tribunal as above, it is explicitly clear that the Tribunal has taken note of the rights and interest of both the parties concerned. The petitioners need not be aggrieved of the rejection of the IAs for joint trial, as the rights and liberties of the parties to agitate the matter both in the O.A as well as in the S.A stand secured by virtue of the relevant provisions of W.P(C) No.5590 of 2010-W 12 law and the petitioners are at liberty to substantiate their case by raising necessary pleadings and adducing evidence independently, more so, by virtue of the law declared by this Court in Bhuvanendran V. L.I.C Housing Finance Ltd. (2009(4) KLT 72) and other binding judicial precedents as referred to herein before. 12. In the above circumstances, it is made clear that the petitioners are at liberty to raise all contentions, legally permissible, before the Tribunal; on which event, the Tribunal shall consider the same and pass appropriate orders in accordance with law. The challenge raised against the dismissal of the applications for joint trial fails and this Court finds it difficult to accept the contentions raised from the part of the petitioners to satisfy the prayer in Exts.P1 and P2. The reasoning given by the Tribunal in Ext.P4 is correct, proper and within the four walls of the law. Hence interference is declined and the Writ Petition is dismissed. However, dismissal of the Writ Petition will not stand in the way of the petitioners in raising appropriate pleadings in S.A/O.A and contesting the matter independently. Sd/- ab P.R.RAMACHANDRA MENON, JUDGE