Case: M/S.Clarity Gold Private Limited &amp; Another Vs. State Bank of India &amp; Others

to the provisions of Section 14.18. On 23 July 2010 the Bank addressed a letter to the Commissioner of Police, Mumbai stating that under Section 13(4), its authorised officer was taking necessary action in an area falling under the jurisdiction of the Malabar Hill Police Station. A request was made in the letter to direct the Police Station to provide constables for the protection of the authorised officer of the Bank in discharging his official duties under the Act. This was followed by a letter dated 23 July 2010 to the officer incharge of the Malabar Hill Police Station. The letter also recorded that the Bank had authorised an enforcement agency to assist and take all necessary actions under the Act. At the foot of the letter, there is an endorsement to the effect that on 27 July 2010, police bandobast should be provided. After possession was taken, on 28 July 2010 a police complaint came to be lodged by the Manager-Accounts and by the employees of the Petitioners. The complaint was to the following effect:We hereby place on record that at 3 pm today some nearly 20 people alongwith your API Mr.Machinder, Head Constable Mr.Patil and Constable Mr.Bhosle forcefully barged into the above mentioned address and started abusing and using the bad words. On enquiry they wee telling that the State Bank of Indore have Court order to take forceful possession of the flat. We told the persons that the owner was not present and we have to take instructions. We also asked them to show the Court order to which they refused and then they started using bad language and started assaulting. Some of the unidentified person from Bank assaulted us, slapped us pushed us and they used the force and pushed us out of the house. The police was seeing this whole incident but they were standing still and did not take any action When we came to the police station the duty inspector has refused to take our complaint of physical assault and forcefully taking the possession of flat without the due of process of law.19. The Tribunal came to the conclusion that the Bank had taken forcible possession of the property without seeking recourse to an order of the Chief Metropolitan Magistrate under Section 14. Now, under Section 14, where the possession of any secured asset is required to be taken by the secured creditor, the secured creditor may make request in writing to the Chief Metropolitan Magistrate or the District Magistrate concerned to take possession. Thereupon, the Chief Metropolitan Magistrate or the District Magistrate is empowered to take possession of the asset and documents relating thereto and to forward them to the secured creditor. Under subsection (2) the Chief Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use or cause to be used such force as may in his opinion be necessary. Section 14 of the Act is an enabling provision under which the secured creditor is empowered to seek recourse to the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate for the purpose of taking possession. Though Section 14 is an enabling provision, it will be wholly impermissible for a secured creditor, despite the provisions of Section 14, to take the law into his own hands and to forcibly evict a borrower from the secured asset. Our legal system is governed by the rule of law. If the borrower hands over possession voluntarily to the secured creditor in pursuance of a notice under Section 13(4), it would be open to the secured creditor to take possession. But, if possession is not voluntarily handed over, the secured creditor cannot take the law into his own hands and secure vacant possession by taking recourse to the police machinery. In such an event, the only remedy that is available is to seek an appropriate order from the Chief Metropolitan Magistrate, or as the case may be, the District Magistrate. Parliament has specifically authorised in subsection (2) those authorities to take or cause to be taken such steps and use or caused to be used such force as may be necessary. Authorisation of the use of force for taking possession is therefore a matter which lies in the jurisdiction and power of the authorities prescribed by Section 14. No secured creditor can by seeking assistance of police machinery unilaterally carry out the eviction of the borrower and take over forcible possession of the secured asset.20. Having said this, it is clear from the record, that the Debt Recovery Tribunal did, as a matter of fact enter a finding of fact that possession was forcibly taken over by a secured creditor in this case. However, the Tribunal clarified that it was not resting its decision on that finding, since quite independently the Tribunal had come to the conclusion that the notice of possession and the sale notice were invalid. When an Appeal was carried by the secured creditor, the Appellate Tribunal reversed the finding of fact of the Tribunal on issues pertaining to the service and delivery of the possession notice under Rule 8(1) and the publication of the possession notice in the newspaper under Rule 8(2). The Appellate Tribunal did not consider the correctness of the finding which was arrived at by the Tribunal that forcible possession was taken by the secured creditor.21. Whether forcible possession was taken by the secured creditor is essentially a question of fact to be determined on the basis of the material on the record. We are of the view that having regard to the parameters of the jurisdiction under Article 226 of the Constitution, it would only be appropriate and proper if that question is left to be decided by the Appellate Tribunal which has a fact finding jurisdiction. There being no finding of the Appellate Tribunal in that regard, we consider it appropriate and proper to remit the proceeding back to the Appellate Tribunal only on this aspect.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]n (2) of Section 13 contemplates a notice in writing by the secured creditor to a borrower to discharge his liabilities in full within sixty days of the notice failing which the secured creditor is entitled to exercise his rights under subsectione (1) of Rule 3 of the Security Interest (Enforcement) Rules, 2002 contemplates that the service of a demand notice under Section 13(2) shall be made by delivering or transmitting at the place where the borrower actually and voluntarily resides or carries on business or personally works for gain, by registered post with acknowledgment due, or by speed post or by courier or by any other means of transmission of documents like fax message or electronic mail.(3) of Rule 3 requires that any other notice in writing to be served on the borrower or his agent by an authorised officer, shall be served in the same manner as provided in the rule. Where there is more than one borrower, the demand notice under(4) has to be served on each borrower.(1) of Rule 8 requires that where the secured asset is an immovable property, the authorised officer shall take or cause to be taken possession, by delivering a possession notice conforming to Appendix IV to the borrower and by affixing the notice on the property.10. Now, in the present case, the notice under Section 13(2) was sent in the name of the director of the First Petitioner. The notice was acknowledged by the Second Petitioner and the acknowledgment also bears the rubber stamp of the company. The Company, as a matter of fact, replied to the notice. From these facts, it is abundantly clear that the notice was duly served on both the Company and on the Second Petitioner. The Second Petitioner is a director of the First Petitioner which is a closely held private limited company. From the material on record, it is evident that the Second Petitioner was an agent authorised to accept notice on behalf of the First Petitioner. In any event, the First Petitioner has also acknowledged service of the notice. There was, therefore, valid compliance with the requirement of Section 13(2) and the Rules in regard to the service of notice under Section 13(2).11. The submission that the action that has been taken by the Bank under Section 13(4) is rendered invalid because the objections of the Petitioners to the notice under Section 13(2) were dealt with in a reply which was remitted beyond a period of one week of the receipt of the representation is without any basis. Following the decision of the Supreme Court in Mardia Chemicals Ltd. vs. Union of Indiaors., (AIR 2004 SC 2371  ) subsection (3A) was inserted by Amending Act 30 of 2004 so as to enable a borrower to make a representation or to raise an objection upon a notice under subsection (2). If the secured creditor comes to the conclusion that there is no basis in the objection, reasons have to be communicated within one week of the receipt of the representation. A Division Bench of the Gujarat High Court has, in Bansal vs. DGM Small Industries Development Bank of India, (AIR 2009 Gujarat 100) held that the requirement that the secured creditor must communicate the reasons forof the representation within one week is directory in regard to the period.We are in respectful agreement with the judgment of the Gujarat High Court which holds that every prescription of a period within which an act has to be done does not constitute a prescription of a period of limitation, a failure of compliance with which would render the action invalid. The object of subsection (3A) is to provide an expeditious method for the disposal of objections in order to ensure that the action of the secured creditor is not held up for an unduly long period of time. The period of one week that is prescribed in subsection (3A) is clearly directory. That apart, the Petitioners have not established that any prejudice was caused to them by the delay on the part of the Bank in responding to the representation submitted to the notice under Section 13(2). That submission must thereforeis no dispute about the fact that the notice was affixed as provided. As regards the issue of service, from the material on record, it has emerged that the notice was acknowledged at the premises by theof the First Petitioner. As a matter of fact Murugan Pillai, who acknowledged the notice had also acknowledged the notice of the Bank dated 25 May 2010 to a director and guarantor of the First Petitioner which was remitted to the very same address. Counsel on behalf of the Petitioners has stated before the Court that the First Petitioner is a closely held company and it is not disputed that both the Second Petitioner and her spouse are directors of the company.On the basis of the material on the record, the Debts Recovery Appellate Tribunal was justified in coming to the conclusion that thewas duly authorised to accept notice and that there was valid service of the notice upon him, before possession was taken. While acknowledging the receipt of the notice, theentered no caveat below his endorsement to the effect that he was not duly authorised to accept service of notice. The finding of fact which is rendered by the Appellate Tribunal is therefore borne out from the material on record and does not warrant interference in proceedings under Article 226 of theSection 14 is an enabling provision, it will be wholly impermissible for a secured creditor, despite the provisions of Section 14, to take the law into his own hands and to forcibly evict a borrower from the secured asset. Our legal system is governed by the rule of law. If the borrower hands over possession voluntarily to the secured creditor in pursuance of a notice under Section 13(4), it would be open to the secured creditor to take possession. But, if possession is not voluntarily handed over, the secured creditor cannot take the law into his own hands and secure vacant possession by taking recourse to the police machinery. In such an event, the only remedy that is available is to seek an appropriate order from the Chief Metropolitan Magistrate, or as the case may be, the District Magistrate. Parliament has specifically authorised in subsection (2) those authorities to take or cause to be taken such steps and use or caused to be used such force as may be necessary. Authorisation of the use of force for taking possession is therefore a matter which lies in the jurisdiction and power of the authorities prescribed by Section 14. No secured creditor can by seeking assistance of police machinery unilaterally carry out the eviction of the borrower and take over forcible possession of the secured asset.20. Having said this, it is clear from the record, that the Debt Recovery Tribunal did, as a matter of fact enter a finding of fact that possession was forcibly taken over by a secured creditor in this case. However, the Tribunal clarified that it was not resting its decision on that finding, since quite independently the Tribunal had come to the conclusion that the notice of possession and the sale notice were invalid. When an Appeal was carried by the secured creditor, the Appellate Tribunal reversed the finding of fact of the Tribunal on issues pertaining to the service and delivery of the possession notice under Rule 8(1) and the publication of the possession notice in the newspaper under Rule 8(2). The Appellate Tribunal did not consider the correctness of the finding which was arrived at by the Tribunal that forcible possession was taken by the secured creditor.