1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORIGINAL SIDE WRIT PETITION {LODGING} NO.276 OF 2010 1. M/s. Jaibharat Synthetics Limited, a Public Limited Company registered under the provisions of the Companies Act, 1956 and having its registered office at 6/4, Ganga Apartments, Khadi Commission, Irla, Vile Parle (W), Mumbai-400 056. 2. Yashpal P. Narula of Mumbai Indian Inhabitant, residing at 11/A, Indu Park C.H.S., 4 Bungalows, Andheri(W), Mumbai-400 058. 3. Prem Y. Narula of Mumbai Indian Inhabitant, residing at 11/A, Indu Park C.H.S., 4 Bungalows, Andheri(W), Mumbai-400 058. 4. Satyanarayani M. Narula of Mumbai Indian Inhabitant, residing at 11/A, Indu Park C.H.S., 4 Bungalows, Andheri(W), Mumbai-400 058. 5. Pooja Narula of Mumbai Indian Inhabitant, residing at 11/A, Indu Park C.H.S., 2 4 Bungalows, Andheri(W), Mumbai-400 058. .... Petitioners - Versus - 1. State Bank of India, a Government of India Undertaking, nationalised under the provisions of the Banking Nationalization (Acquisition & Transfer of Undertakings) Act, 1971 having its office at Industrial Finance Branch, Vrindavan, 1st Floor, Sir M.V.Road, Andheri (E), Mumbai - 400 069. 2. The Asset Reconstruction Company Ltd. (ARCIL), a Company incorporated under the Companies Act, 1956 and registered as a Securitization Assets Reconstruction Company pursuant to Section 3 of the SARFAESI Act having its registered office at 17th Floor, Express Towers, Nariman Point, Mumbai-400 021. 3. Office of the Collector, Palghar. .... Respondents Shri S.U. Kamdar, Senior Advocate with Ms Pooja Patil i/b Little & Co. for the Petitioners. Dr. B.B. Saraf with Shri Vinod Kothari i/b Apex Law Partners for Respondent No.2. 3 CORAM: J.N. PATEL AND A.P. BHANGALE, JJ. RESERVED ON : MARCH 22, 2010 PRONOUNCED ON: MARCH 29, 2010 JUDGMENT (Per A.P. Bhangale, J.): 1. Heard. Rule. Learned counsel appearing on behalf of respondent No.2 waives notice. By consent, taken up for hearing forthwith. 2. The petitioners seek to invoke the writ jurisdiction under Article 226 read with Articles 14, 19 and 300-A of the Constitution of India, questioning the legality and propriety of the notice dated 5-1-2010, issued by the Tahsildar, Palghar, District Thane, informing the petitioners to handover possession of the immoveable and moveable properties to respondent No.2-the Asset Reconstruction Company Limited (ARCIL), within 15 days from the date of the notice. The petitioners have also prayed for quashing and setting aside of the order dated 24-8-2009, passed by the learned District Magistrate, 4 Thane and for issuance of a direction prohibiting respondent Nos.1 and 2 from taking actual possession of the factory situated at Plot No.D-24, MIDC, Tarapur, Taluka Palghar, District Thane, without following the procedure laid down in Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the Act ). 3. The facts of the case, in brief, are thus: The petitioner No.1 is a duly registered Public Limited Company and petitioner Nos.2 to 5 are its Directors. The petitioners are seeking to protect their factory premises situated at Plot No.D-24, MIDC, Tarapur, Taluka Palghar, District Thane from being proceeded against by or on behalf of the secured creditors. It is the case of petitioners that petitioner No.1-company had in March, 2002 approached respondent No.1-State Bank of India for financial assistance as the petitioners were indebted to Bharat Co- operative Bank and needed further finances. The respondent No.1 agreed to sanction Rs.3 crores (Three crores) and issued a Pay Order of 5 Rs.1.94 crores in favour of Bharat Co-operative Bank and took over the accounts. The petitioners were required to complete formalities to secure the debt, furnish undertakings, etc., to enable respondent No.1 to release funds towards the working capital to the petitioners. According to the petitioners, respondent No.1 had insisted upon the petitioners to complete a Tripartite Agreement with M.M.C. and the petitioners complied with the requirements of respondent No.1 on 10-5-2002. But in the absence of the provision for working capital, the petitioners were unable to carry on their business and were facing a severe financial crunch. 4. On 10-7-2002, respondent No.1 issued a notice under Section 13(2) of the Act calling upon the petitioners to pay the amounts demanded, which was challenged by the petitioners by filing Writ Petition No.2088 of 2003 in this Court. By an interim order passed in the said writ petition on 8-9-2003, respondent No.1 was allowed to take symbolic possession of the property in question and not to disturb the actual physical possession. The respondent No.1 assigned the debt in favour of respondent No.2, who took out Chamber Summons 6 No.392 of 2006. Consequent to the judgment of the Supreme Court upholding the constitutional validity of Section 13(2) of the Act, the petitioners withdrew their Writ Petition on 15-2-2007. Thereafter, respondent No.1 filed Original Application No.65 of 2004 before the Debts Recovery Tribunal and on 23-6-2009 obtained an order from the Court of the Chief Metropolitan Magistrate, Esplanade, Mumbai, for taking forcible possession. The petitioners, thereafter, filed Writ Petition (Lodging) No. 1315 of 2009 in this Court. By an interim order dated 7-7-2009, this Court observed that the symbolic possession shall vest in the respondents but the physical possession shall not be disturbed. As the interim order was continued by this Court with a direction to the petitioners to argue the original application before the Debts Recovery Tribunal, on 7-9-2009 the petitioners withdrew Writ Petition No.1315 of 2009 and filed an application before the DRT-III being Application No.136 of 2009, which came to be dismissed on 24-12-2009. Thereafter, the petitioners preferred an appeal before the Debts Recovery Appellate Tribunal being Appeal No.36 of 2010. The Debts Recovery Appellate Tribunal by its order dated 29-1-2010 directed the petitioners to deposit a sum of Rs.1.25 7 crores by 31-3-2010 and stayed the delivery of possession of the property till then. Thus, upon receiving the notice dated 5-1-2010, the petitioners filed the present petition on 4-2-2010. 5. The learned counsel appearing for the petitioners urged that after the issuance of the notice dated 10-7-2003, under Section 13(2) of the Act, the secured creditors while taking measures under Section 13(4) of the Act ought to have issued notice for taking possession of the secured assets. According to the petitioners, such an action can be initiated under Section 14 of the Act by moving an application before the Chief Metropolitan Magistrate or the District Magistrate for assistance in taking possession of the property which is the subject-matter of the secured debt. According to the learned counsel, the remedy under Section 17 of the Act would be available if a person is aggrieved by adoption of the measures enumerated under Section 13(4) of the Act. The learned counsel submitted that the petitioners were entitled to a notice under Section 13(4) of the Act calling upon them to hand over the possession, as once property is sold, the debtor would have no right to appeal 8 under Section 17 of the Act. The learned counsel thus contended that without issuance of a notice under Section 13(4), the District Magistrate could not have been moved by the secured creditors to take actual physical possession. According to the learned counsel, the factory of the petitioners is still operational and taking the actual physical possession thereof would result into a heavy loss to the petitioners, as it would render the workers of the petitioners jobless and tarnish the image of the petitioners in the market. It is further submitted that respondent No.2-ARCIL cannot invoke the provisions of the Act as the petitioners had created security interest only in favour of respondent No.1-Bank. According to the learned counsel, the right of the petitioners to appeal under Section 17 of the Act could not be made nugatory by the respondents. 6. The learned counsel for the petitioners placed reliance on a Division Bench decision of the Gujarat High Court in the case of Kotak Mahindra Bank Ltd. v. O.L. Of Aps. Star Ind. Ltd. {O.J. Appeal No.156 of 2007 with connected matters} decided on 12-1-2009 to submit that Section 6(1) of the Banking 9 Regulation Act, 1949 specified the forms of business in which banking companies may engage, which did not provide/permit for assignment of debt to a third party. Reference is then made to press into service the decision in M/s. Kalyani Sales Company & Anr. v. Union of India & Anr. {AIR 2006 Punjab & Haryana 107} to submit that a borrower or any person in possession of an immoveable property cannot be physically dispossessed at the time of issuing notice under Section 13(4) of the Act so as to defeat adjudication by the Debts Recovery Tribunal and that physical possession cannot be taken by Banks or financial institutions by following the procedure laid down under Section 14 of the Act, or after the sale is confirmed in terms of Rule 9 of the Security Interest (Enforcement) Rules, 2002. According to the learned counsel, the impugned order and the notice/communication are violative of the fundamental right of equality before the law, freedom of business and right to property. 7. On the other hand, the learned counsel for respondent No.2 contended that the petition is misconceived as there is no infringement of any right of the petitioners. He submitted that the factory premises of the petitioners were 10 inspected by the Circle Officer of Tarapur at the instance of the Tahsildar on 28-1-2010 and it was reported that the factory was closed and that there was no activity of whatsoever nature going on in the factory. It was further contended that the petitioners are persistent defaulters in repayment of debt as they were originally indebted to SICOM and then became indebted to Punjab & Sind Bank for which they are facing recovery proceedings before the Debts Recovery Tribunal-II, Mumbai. They had also borrowed amounts from Bharat Co-operative Bank but defaulted to repay and approached respondent-Bank for taking over of the accounts but again defaulted to repay. The income-tax authorities had also attached the property of the petitioners for non-payment of dues. The respondent-Bank filed an application being Original Application No.65 of 2004 to recover dues and for enforcement of mortgage in respect of the factory. The Debts Recovery Tribunal by its order dated 30-10-2009 allowed the original application and directed payment of dues in the sum of Rs.3,35,26,962.43 along with interest at the rate of 13% per annum, with quarterly rests from the date of the original application till realisation. The learned counsel contended that in view of the non-obstante clause 11 (Notwithstanding anything contained in any agreement or any other law for the time being in force, any securitisation company or reconstruction company may acquire financial assets of any bank or financial institution-) in Section 5 of the Act, there is no legal impediment whatsoever for a Bank to enter into an agreement with any financial institution which is securitisation or reconstruction company like respondent No.2 to assign rights of the Bank to recover financial assets. Such assignee securitisation or reconstruction company becomes deemed lender to enforce rights of the assignor Bank, according to law. The learned counsel for respondent No.2, therefore, submitted that the decision in Kotak Mahindra Bank s case (supra) cannot be of any assistance to the petitioners case. The learned counsel for respondent No.2 further submitted that the decision in M/s. Kalyani Sales Company s case (supra) also cannot of any assistance to the petitioners case in view of the legal position which is now settled by the decisions of the Supreme Court in the case of Mardia Chemicals Ltd. Etc. Etc. v. Union of India (UOI) and Ors. Etc. Etc. {AIR 2004 SC 2371} and M/s. Transcore v. Union of India & Anr. {AIR 2007 SC 712}. Reliance is 12 also placed in the decision of a Division Bench of this Court in ATV Projects India Limited v. State of Maharashtra & Ors. {2007 (4) Bom.C.R. 711} to emphasise the submission that once a notice under Section 13(2) of the Act is issued, thereafter, for further steps to enforce the security interest under Section 14 of the Act, the principles of natural justice are not involved, as only a request for help is made to the Chief Metropolitan Magistrate or the District Magistrate concerned, as the case may be, to take possession of the secured assets or other documents and to forward such assets and/or documents to the secured creditor. The act of the Chief Metropolitan Magistrate or the District Magistrate concerned, as the case may be, in assisting the secured creditor to enforce the security interest cannot be called into question in any Court or before any authority. The learned counsel, therefore, submitted that the petition is liable to be dismissed. 8. We have perused the petition and the annexures thereto and have also considered the submissions advanced as also the decisions referred to by the respective counsel. 13 9. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 {54 of 2002} was brought into force since 21-6-2002 with a view to regulate securitisation and recontruction of financial assets and to enforce security interests. It enables Banks and financial institutions in India to have an identical level playing field compared with other participants in global financial markets, so as to enforce security interests; with power to take possession of securities and to sell them. The provisions in the Act aims at  expeditious recovery of Non-Performing Assets (N.P.A.) of Banks and financial institutions. Success of financial sector, particularly healthy banking industry is of salutary importance for the progress, growth and development of the nation s economy. Thus, the enactment is in the category of a reform legislation in financial sector to facilitate securitisation of financial assets of Banks and financial institutions in India. While Banks and financial institutions possess more drastic powers under the Act, the scheme of the Act also ensures safeguards to protect the borrower s interest. A lender owes a duty to act fairly and in good faith, while a borrower 14 can plead deficiencies on the part of the Bank or financial institution. As a borrower in default is entitled to know the reasons as to why and how his account is classified as non- performing assets (N.P.A.), a secured creditor seeking to enforce security interest is required to give a notice in writing furnishing details of the amounts payable by the borrower and details of the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts within 60 days from the date of notice. Such notice given in writing affords sufficient time to the borrower to raise specific objections or to make representation so that the secured creditor can apply his mind and duly consider objections which are raised or representation made by the borrower in response to written notice, as above. Borrowers may propose one time settlement or re-scheduling of instalments payable to discharge debt liability. As regards objections, the secured creditor is obliged to communicate reasons for non-acceptance thereof or the representation, if any, made. Mere fact that objections were raised and they are rejected by the secured creditor cannot be said to be a valid cause of action for the borrower to knock at the doors of the Debts Recovery 15 Tribunal by appeal under Section 17 of the Act, unless measures are taken, as envisaged under Section 13(4) of the Act by the secured creditor. The secured creditor is entitled to take any of the measures to recover his secured debt once noticee-borrower has failed to comply with the statutory notice given under Section 13(2) of the Act. Those measures include taking possession (symbolic or actual) of the secured assets of the borrower and to transfer the secured assets for realisation thereof or taking over of the management of the borrower s business for the purpose or realising the secured assets, appointing any person to manage the secured assets taken possession of, to recover the secured assets if acquired by any person from the borrower. The borrower, if is aggrieved by the measures taken by the secured creditor under Section 13(4), can invoke the remedy of an appeal under Section 17 of the Act on the ground that the action taken is wrong and may prefer further appeal as permissible in view of Section 18 of the Act. 10. Looking to the scheme of the Act; the non-obstante clauses introduced to give over- riding effect to the provisions of the Act in the interest of a healthy and growth oriented 16 economy in India, as also the fact that civil Court under Section 34 of the Act is barred from entertaining any suit or to grant injunction in respect of matters which are required to be determined by the Debts Recovery Tribunal or the Appellate Tribunal constituted under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. In our view, therefore, power under the extra-ordinary writ jurisdiction under Article 226 of the Constitution of India can be exercised sparingly and in exceptionally deserving cases, wherein the petitioner has made out a case that the secured creditor has failed to abide and follow any express legal provision, rule or regulation which is binding upon him, for which the petitioner is otherwise remediless. While the secured creditor, after the expiry of the notice period under Section 13(2) of the Act, is expected to take measures under Section 13(4) within a reasonable time, depending upon the facts of the case, after having considered the objections raised or the representation made, if any, by the borrower in view of Section 13(3A) of the Act and after communicating non-acceptance thereof to the borrower, the secured creditor (Banks or financial institutions, as the case may be) 17 shall be enabled by machinery of law to overcome the problems arising from the asset liability mismatch, difficulties in the way of recovery of non-performing assets or to realise long term assets by managing problems of liquidity. Therefore, Section 14 of the Act provides for an assistance which the secured creditor may seek from the Chief Metropolitan Magistrate or the District Magistrate having jurisdiction over the local area where the secured assets are situated. In order to take possession of assets and documents, the provisions under Section 14 enables the secured creditor to request the Chief Metropolitan Magistrate or the District Magistrate having jurisdiction in the local limits of the area to take requisite steps, including using or causing necessary force to be used for taking possession of the secured assets and documents and forwarding them to the secured creditor. The said provision is intended to ensure that the proceedings initiated under Section 13(2) of the Act are carried to its logical outcome. The provision do not contemplate judicial process or work as it does not involve any adjudicatory process and as such, therefore, the principles of natural justice are not attracted. In view of the observations by the 18 Supreme Court (in para 56) of its decision in M/s. Transcore v. Union of India (supra), if a borrower is dispossessed unlawfully or not in accordance with the provisions of the Act, then the Debts Recovery Tribunal is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before the confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. In view of the non-adjudicatory process under Section 14, it would be erroneous to say that the rights of the borrower would stand defeated without adjudication. 11. The order dated 24-8-2009 is issued pursuant to an action requested by the assignee-financial institution in terms of Section 14 of the Act directing the Tahsildar, Palghar, District Thane to do the needful to take possession of the secured assets i.e., the mortgaged property standing in the name of the petitioners herein. Pursuant to the order from the District Magistrate, Thane, the Tahsildar concerned sent a communication dated 5-1-2010 to the petitioners informing them to hand-over possession of the property in question so as to 19 enable him to hand-over the same to respondent No.2, the lawful assignee of respondent No.1. The order and the communication sought to be impugned herein are nothing but an assistance sought by the secured creditor from the legal authorities in accordance with law to enforce the security interest. In other words, it is a help provided by the lawful authority by a non- adjudicatory process, as contemplated under Section 14 of the Act. There is nothing unconstitutional or contrary to law in the impugned order and the communication nor they are violative of the provisions of the Constitution of India. 12. For the reasons stated above, the writ petition being devoid of substance, deserves to be dismissed and is accordingly dismissed. The rule is discharged. No order as to costs. Sd/- J.N. PATEL, J. Sd/- A.P. BHANGALE, J.