# Dilip Kumar Singh and another v. State of U.P. & others

- **Citation:** (2013) 1 ILRA 113
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2012-12-14
- **Case number:** Civil Misc. Writ Petition No. 58329 of 2012
- **Bench:** Ashok Bhushan, Abhinava Upadhya
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/dilip-kumar-singh-and-another-v-state-of-u-p-others-42405
- **Pages:** 15

## Headnote

C.S.C.
Sri P.N. Tripathi
Sri Tarun Verma
Sri Vikram D. Chauhan

Securitization
and
Reconstruction
of
Financial
Assets
and
Enforcement
Security Interest Act, 2002-Section 14Application before District Magistrate by
secured crediting-whether maintainable
even after execution of sale deed in
favour
of
auction
purchaser
and
pendency of application under Section 17
before the Tribunal-held-"Yes".

Held: Para-16 and 24

In view of the aforesaid discussions, the
Issue No.1 is decided holding that
secured creditor is legally entitled to
take physical possession even after
execution of sale deed in favour of
auction purchaser and the application
under Section 14 of the 2002 Act by the
Bank before the District Magistrate was
fully maintainable. The Issue No.1 and 2
are answered accordingly.

In view of the aforesaid discussions, we
are of the view that by mere filing an
application under Section 17 of the 2002
Act, there is no embargo on the Bank
from proceeding under the 2002 Act.
Case Law discussed:
A.I.R. 2010 Madras 24; (1921) 41 MLJ 297;
(1923) 45 MLJ 431; AIR 2006 P H 211

## Text

_Characters 0–39,807 of 50,994. This is a partial read: ask again with offset=39807 for what follows._

1 All] Dilip Kumar Singh and another V. State of U.P. & others
113
of auction is vitiated and the same deserves
to be quashed.

34. In the result, the writ petition
succeeds and is allowed. The entire
proceedings of recovery is hereby quashed.

35. The respondent no. 6 shall be
entitled to the refund of the auctioned
amount alongwith 9% interest, which is to
be borne out by the petitioner and be paid
within a period of one month from today.
However, the petitioner shall also be
entitled to get back the excess amount after
satisfying the loan out of the auctioned
money, if any.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 14.12.2012

BEFORE
THE HON'BLE ASHOK BHUSHAN, J.
THE HON'BLE ABHINAVA UPADHYA, J.

Civil Misc. Writ Petition No. 58329 of 2012

Dilip Kumar Singh and another

 ...Petitioner
Versus
State of U.P. Thru Secy.and others

 ...Respondents

Counsel for the Petitioner:
Sri Deepak Kumar Jaiswal
Sri Sanjay Kumar Gupta

Counsel for the Respondents:
C.S.C.
Sri P.N. Tripathi
Sri Tarun Verma
Sri Vikram D. Chauhan

Securitization
and
Reconstruction
of
Financial
Assets
and
Enforcement
Security Interest Act, 2002-Section 14Application before District Magistrate by
secured crediting-whether maintainable
even after execution of sale deed in
favour
of
auction
purchaser
and
pendency of application under Section 17
before the Tribunal-held-"Yes".

Held: Para-16 and 24

In view of the aforesaid discussions, the
Issue No.1 is decided holding that
secured creditor is legally entitled to
take physical possession even after
execution of sale deed in favour of
auction purchaser and the application
under Section 14 of the 2002 Act by the
Bank before the District Magistrate was
fully maintainable. The Issue No.1 and 2
are answered accordingly.

In view of the aforesaid discussions, we
are of the view that by mere filing an
application under Section 17 of the 2002
Act, there is no embargo on the Bank
from proceeding under the 2002 Act.
Case Law discussed:
A.I.R. 2010 Madras 24; (1921) 41 MLJ 297;
(1923) 45 MLJ 431; AIR 2006 P H 211

(Delivered by Hon'ble Ashok Bhushan, J.)

1. Heard Sri Deepak Kumar Jaiswal
learned counsel for the petitioners, Sri
Tarun Verma appearing for the Allahabad
Bank and learned Standing Counsel for the
State-respondents.

2. By this writ petition, the petitioners
have prayed for quashing the order dated
3rd August, 2012 passed by the District
Magistrate, Mirzapur under Section 14 of
the Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Act, 2002 directing for
providing police help for taking possession
of the mortgaged assets. A writ of
mandamus
has
also
been
sought
commanding the respondents No.2 to 5 not
to dispossess the petitioners from their
residential house situate at Plot No.78/1,
Bhajan Ka Pura, Mirzapur.
114 INDIAN LAW REPORTS ALLAHABAD SERIES [2013

3. Brief facts of the case as emerge
from pleadings in the writ petition, are;
petitioners
took
a
housing
loan
of
Rs.12,00,000/- from Allahabad Bank on 8th
July, 2004. The security interest was
credited on the Plot No.78/1. Default was
committed by the petitioners in repayment
of loan, consequently the Bank initiated
proceedings under the Securitisation and
Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
(hereinafter referred to as the 2002 Act). A
notice dated 24th February, 2009 under
Section 13(2) of the 2002 Act was issued
demanding repayment of the amount. The
petitioners failed to make payment within
the time allowed in the notice, hence the
Bank invoked its power under Section 13(4)
of the 2002 Act by issuing possession notice
dated 9th July, 2009. The Bank further
issued a notice for sale of the mortgaged
assets dated 4th May, 2011 which was
published on 6th May, 2011 in the
newspaper inviting tenders for sale of the
mortgaged assets and 8th June, 2011 was
fixed for auction. The sale was confirmed
and sale certificate dated 29th June, 2011
was issued. An application under Section 14
of the 2002 Act was filed by the Bank dated
29th July, 2011 before the District
Magistrate on which an order was passed on
3rd August, 2011 for taking possession by
police force. The petitioners filed a writ
petition being Writ Petition No.36888 of
2011 in this Court challenging the action of
the Bank taken under Section 13(4) of the
2002 Act which writ petition was dismissed
on the ground of alternative remedy
available under Section 17 of the 2002 Act.
The petitioners thereafter on 8th July, 2011
filed an application under Section 17 of the
2002 Act which was registered as S.A.
No.181 of 2011. The registered deed dated
14th July, 2011 was also executed by the
Bank in favour of auction purchaser after
issuance of sale certificate dated 29th June,
2011. The application
filed by the
petitioners under Section 17 of the 2002 Act
was dismissed by the Debt Recovery
Tribunal vide its order dated 31st October,
2012. The Debt Recovery Tribunal by
another order of the dated (31.10.2012)
granted 7 days time to the petitioners to
approach the appellate Tribunal and a
protection of 7 days from dispossession was
granted. The petitioners thereafter instead of
filing an appeal before the appellate
Tribunal, has come up to this Court by
filing this writ petition on 3rd November,
2012.

4. Sri Deepak Kumar Jaiswal, learned
counsel for the petitioners submits that
Bank is not legally entitled to take physical
possession of the properties after executing
the registered sale deed in favour of the
auction purchaser. The Bank cannot
maintain an application under Section 14 of
the Act before the District Magistrate
seeking police assistance to take possession
of the secured assets after executing the
registered sale deed in favour of auction
purchaser. He further submits that after
executing the registered sale deed by
delivering the possession of the property the
Bank complete the sale or transfer under
Section 54 of the Transfer of Property Act
as well as under Rule 9(9) of the Security
Interest (Enforcement) Rules, 2002, the
implied contract to give possession will
operate from Section 55(1)(f) of the
Transfer of Property Act and only may be
enforced by a suit for specific performance
because after executing the registered sale
deed in favour of auction purchaser, the
matter regarding possession belong to the
civil Court and it will be decided under the
suit for possession. It is further submitted
that right of the Bank for further action is
automatically
suspended
under
the
1 All] Dilip Kumar Singh and another V. State of U.P. & others
115
provisions of Section 17(4) upon filing of
an application under Section 17 of the 2002
Act and secured creditor cannot proceed
further till the declaration of the recourse
taken by secured creditor under Section
13(4) is in accordance with the provisions
of the 2002 Act and the rules made
thereunder. Sri Jaiswal further submits that
Bank can only avail the opportunity of
Section 17(6) to make an application before
the appellate Tribunal for directing the Debt
Recovery Tribunal for expeditious disposal
of the application pending before the Debt
Recovery Tribunal if the same is not
disposed of within the period of four
months as specified under Section 17(5) of
the 2002 Act.

5. Sri Tarun Verma, learned counsel
for the Bank, refuting the submissions of
learned counsel for the petitioners, contends
that Bank is fully entitled to make an
application under Section 14 of the 2002
Act before the District Magistrate for taking
actual physical possession even after
issuance of sale certificate and there is no
prohibition in the 2002 Act from moving
the
District
Magistrate
for
physical
possession. He further contends that mere
fact that an application under Section 17 of
the 2002 Act has been filed or pending does
not prohibit the Bank from proceeding
further in accordance with the 2002 Act. He
further submits that application under
Section 17 of the 2002 Act was filed by the
petitioners much after sale of the mortgaged
assets and issuance of sale certificate. It is
submitted that the application under Section
17 of the 2002 Act filed by the petitioners
having been dismissed, the remedy of the
petitioners is to file an appeal under Section
18 of the 2002 Act and the writ petition be
not entertained.

6. Learned counsel for the parties have
placed reliance on decisions of this Court,
Punjab and Haryana High Court and
Madras High Court which shall be referred
to while considering the submissions in
detail.

7. From the submissions raised by
learned counsel for the parties, following
issues arise for determination:-

(i)Whether the secured creditor/Bank
is
legally
entitled
to
take
physical
possession of the properties after executing
the registered sale deed in favour of auction
purchaser?

(ii)Whether the secured creditor/Bank
can move an application under Section
14(1)(2) of the 2002 Act before the District
Magistrate to seek the police assistance for
taking possession of the secured assets after
execution of the registered sale deed in
favour of auction purchaser?

(iii)Whether the right of the secured
creditor/Bank for taking further measures as
provided
under
Section
13(4)
are
automatically
suspended
under
the
provisions of Section 17(4) upon filing of
an application under Section 17(1) of the
2002 Act and secured creditor can proceed
further only when the declaration is made
that the recourse taken by the secured
creditor under Section 13(4) is to be in
accordance with the provisions of the 2002
Act and the rules made thereunder by the
Debt Recovery Tribunal?

8. All the above issues being
interconnected, are taken together.

9. Before we proceed to consider the
issues, which have arisen for consideration,
it is relevant to note that the application of
116 INDIAN LAW REPORTS ALLAHABAD SERIES [2013
the petitioners filed under Section 17 of the
2002 Act having been rejected by order
dated 31st October, 2012, the petitioners
have statutory remedy under Section 18 of
the 2002 Act, however, in view of the fact
that learned counsel for the petitioners has
raised
certain
issues
pertaining
to
jurisdiction of the Bank and the issues
relating to interpretation of scope and ambit
of the provisions of Sections 14 and 17 of
the 2002 Act, we proceed to consider the
issues on merits also.

10. The submission, which has been
much pressed by learned counsel for the
petitioners, is that the Bank has no
jurisdiction to file an application under
Section 14 of the 2002 Act after sale of the
mortgaged assets. Learned counsel for the
petitioners referring to Section 14(1) of the
2002 Act submits that application for
taking possession has to be made by the
Bank before sale of the mortgaged assets.
He submits that the scheme of the 2002
Act contemplates taking possession by the
Bank before sale, since after sale the Bank
is obliged to handover possession to the
auction purchaser by virtue of sub-rule (9)
of Rule 9 of the Security Interest
(Enforcement) Rules, 2002. Section 14(1)
of the 2002 Act, which is relevant for the
purpose, is quoted below:-

"14. Chief Metropolitan Magistrate
or District Magistrate to assist secured
creditor in taking possession of secured
asset.- (1) Where the possession of any
secured asset is required to be taken by the
secured creditor or if any of the secured
asset is required to be sold or transferred
by the secured creditor under the
provisions of this Act, the secured creditor
may, for the purpose of taking possession
or control of any such secured asset,
request, in writing, the Chief Metropolitan
Magistrate or the District Magistrate
within whose jurisdiction any such secured
asset or other documents relating thereto
may be situated or found, to take
possession
thereof,
and
the
Chief
Metropolitan Magistrate or, as the case
may be, the District Magistrate shall, on
such request being made to him-

(a) take possession of such asset and
documents relating thereto; and

(b) forward such asset and documents
to the secured creditor."

11. Section 14(1) contains two
categories where an application before the
District Magistrate is contemplated i.e. (i)
where the possession of any secured asset
is required to be taken by secured creditor
or (ii) if any of secured asset is required to
be sold or transferred by the secured
creditor ...... The words "where the
possession of any secured asset is required
to be taken by the secured creditor", are
wide enough to embrace in itself any
contingency where possession of any
secured asset is required to be taken.
Although possession can be taken by the
Bank of mortgaged assets when secured
asset is required to be sold or transferred
but the scheme of the 2002 Act does not
indicate that it is necessary for the Bank to
have actual physical possession before
proceeding to exercise its power under
Section 13(4) of the Act for sale of the
mortgaged asset. Section 14 of the 2002
Act is a provision empowering the Bank to
take assistance from Chief Metropolitan
Magistrate or District Magistrate for taking
possession of the secured asset. The power
to take possession by the secured creditor
flows from Section 13(4) of the 2002 Act
where secured creditors is entitled to take
recourse of any of the measures provided
1 All] Dilip Kumar Singh and another V. State of U.P. & others
117
under sub-section (4) of Section 13. In this
context it is also relevant to refer to Rule 8
of the Security Interest (Enforcement)
Rules, 2002 which enumerates various
steps for sale of immovable secured assets
and one of the steps to be taken by the
secured creditor is to take possession. Rule
8(1), 8(2) and 8(3), which are relevant, are
quoted below:-

"8. Sale of immovable secured assets.-
- (1) Where the secured asset is an
immovable property, the authorised officer
shall take or cause to be taken possession,
by delivering a possession notice prepared
as nearly as possible in Appendix IV to
these rules, to the borrower and by affixing
the possession notice on the outer door or
at such conspicuous place of the property.

(2) The possession notice as referred
to in sub-rule (1) shall also be published in
two leading newspaper, one in vernacular
language having sufficient circulation in
that locality, by the authorised officer.

(3) In the event of possession of
immovable property is actually taken by
the authorised officer, such property shall
be kept in his own custody or in the
custody of any person authorised or
appointed by him, who shall take as much
care of the property in his custody as a
owner of ordinary prudence would, under
the similar circumstances, take of such
property."

12. The words "possession notice" as
mentioned in Rule 8(1) and (2) is a notice
for
taking
possession
both
actual
possession or otherwise. Sub-rule (3) of
Rule
8
of
the
Security
Interest
(Enforcement) Rules, 2002 uses the words
"in the event of possession of immovable
property is actually taken" which clearly
indicates that taking of possession may be
actual or may be constructive. Certain
consequences follow after taking actual
possession as indicated in sub-rules (3) and
(4) of Rule 8. Thus before proceeding for
sale of the mortgaged assets Bank can take
actual possession as well as symbolic
possession and the scheme of the 2002 Act
and the 2002 Rules do not indicate that
without taking actual possession, the Bank
cannot proceed with the sale of the
mortgaged assets.

13. The question as to whether the
Bank can take possession by moving an
application under Section 14 of the 2002
Act after issuance of sale certificate was
raised before a Division Bench of Madras
High Court in the case of M/s. Kathikkal
Tea Plantations vs. State Bank of India
and another reported in A.I.R. 2010
Madras 24. The issue was noticed by the
Division Bench in paragraph 5 of the
judgment. The Division Bench after
considering several decisions repelled the
contention that application under Section
14 of the 2002 Act is not maintainable
after issuance of sale certificate. Following
was laid down by the Division Bench of
Madras High Court in paragraphs 8, 12,
16, 20 and 21 of the said judgment:-

"8. Learned counsel appearing for the
respondent bank in W.P.No.10228 of 2009
contended that section 13(4) empowers the
bank to take possession of the secured
assets and take over the management of
the business of the borrower. It does not
say anything about the actual physical
possession. The object of the SARFAESI
Act is only to realise long term assets,
manage problems of liquidity, asset
liability mis-match and improve recovery
by exercising powers to take possession of
securities, sell them and reduce non-
118 INDIAN LAW REPORTS ALLAHABAD SERIES [2013
performing assets by adopting measures
for recovery or reconstruction. In other
words, the object of the SARFAESI Act is a
speedy recovery of the non-performing
assets. Further, Section 13 does not say
that the transfer has to be effected under
section 13(6) only after taking physical
possession. If the dues of the secured
creditor are tendered at any time before
the date fixed for sale or transfer, the
secured assets shall not be sold or
transferred by the secured creditor.
Therefore, before the confirmation of sale,
the property can be recouped by the
borrower if he tenders the amount. On
failure to pay the amount only, the sale is
confirmed and sale certificate is issued in
accordance with Rule 9(6) of SARFAESI
Rules. Nowhere in section 13 of SARFAESI
Act it has been stated that the right to
transfer can be effected only after taking
actual physical possession or that the
exercise of taking over possession under
section 13(4) shall be of actual physical
possession.
After
taking
symbolic
possession or constructive possession
under
section
13(4),
the
borrower
continues to be in the property only in de
facto possession. Learned counsel has
further contended that the language found
in 14(1) has to be interpreted only in
consonance with the objects of the
SARFAESI Act. Therefore, it cannot be
said that the word 'secured creditor' and
'secured debt' found in section 14(1) does
not mean that the bank lost the power to
take actual possession, after issuance of
the sale certificate.

12.In view of the above submissions,
now the question to be decided is whether
the Respondent banks are legally entitled
to take physical possession of the property
after issuance of the sale certificate in
favour of the auction purchasers by filing
petition
under
section
14(1)(2)
of
SARFAESI Act before the concerned
Magistrate. The statements and reasons for
SARFAESI Act seem to be that the Act was
enacted to reconstruction of financial
assets and enforcement of security interest
and for matters connected therein. The
banks as 'secured creditor', as defined
under section 2(zd) of the Act, are
empowered under section 13(4) of the
SARFAESI Act to take possession of the
'secured asset' as defined under section
2(zc) and also empowered to transfer the
same under section 13(6) of the SARFAESI
Act. It is relevant to extract Sections 13(4)
and 13(6), which read as follows:

"13. Enforcement of security interest:

(4) In case the borrower fails to
discharge his liability in full within the
period specified in sub-section (2), the
secured creditor may take recourse to one
or more of the following measures to
recover his secured debt, namely:-

(a) take possession of the secured
assets of the borrower including the right
to transfer by way of lease, assignment or
sale for realising the secured asset;

(b) take over the management of the
business of the borrower including the
right to transfer by way of lease,
assignment or sale for realising the
secured asset:

Provided that the right to transfer by
way of lease,assignment or sale shall be
exercised only where the substantial part
of the business of the borrower is held as
security for the debt:

Provided further that where the
management of whole, of the business or
1 All] Dilip Kumar Singh and another V. State of U.P. & others
119
part of the business is severable, the
secured creditor shall take over the
management of such business of the
borrower which is relatable to the security
of the debt;

(c) appoint any person (hereafter
referred to as the manager), to manage the
secured assets the possession of which has
been taken over by the secured creditor;

(d) require at any time by notice in
writing, any person who has acquired any
of the secured assets from the borrower
and from whom any money is due or may
become due to the borrower, to pay the
secured creditor, so much of the money as
is sufficient to pay the secured debt".

Section 13(6) reads as follows:

"Any transfer of secured asset after
taking possession thereof or take over of
management under sub-section (4), by the
secured creditor or by the manager on
behalf of the secured creditors shall vest in
the transferee all rights in, or in relation
to, the secured asset transferred as if the
transfer had been made by the owner of
such secured asset."

16. From the above, the submission
made by the learned counsel for the
respondents that section 14 of the Act
cannot be read in isolation and has to be
viewed in the context of all other
provisions of the Act, such as Sections
13(4)(6)(8),15,17,
18
Rule
8(9)
of
SARFAESI Rules and section 55 of the
Transfer of Property Act is acceptable.
These provisions are in conjunction with
Section 14 of the Act for the purpose of
interpretation, to be adopted, to achieve
and sub-serve the object of the SARFAESI
Act. Any other approach or interpretation
will defeat the object of the Act. The object
of the Act is only to enable the secured
creditor, financial institutions to realise the
long term assets, manage problems of
liquidity, asset liability mis-match and
improve recovery by exercising powers to
take possession of securities, sell them and
reduce non-performing assets by adopting
measures for recovery or reconstruction.
Therefore, it could be understood that the
Act was brought for recovering the amount
in speedy manner in taking possession of
the properties and in realising the money.
The third party, who comes forward to
purchase the secured asset, must have a
confidence that he would get the title to the
property at the earliest. If the transferring
of the property by way of title is going to
be delayed endlessly, then the object of the
Act which is meant for speedy recovery,
would be defeated in whole. Therefore, as
contended by the learned counsel for the
banks, that if interpretation is given by
taking the words in isolation from section
14, it would defeat the whole object. Only
on a combined reading of section 14 along
with the other sections, it would give a
clear picture of the object. In this regard, a
useful reference could be placed on the
decisions relied on by the learned counsel
appearing for the impleaded party.

(i) (1986) 2 SCC 237 (M/s.Girdhari
Lal and Sons ..vs.. Balbir Nath Mathur and
others

(ii) (1992) 1 SCC 361 (Administrator,
Municipal Corporation ..vs.. Dattatraya
Dahankar)

(iii) 2001(9) SCC 673: (Nirathilingam
..vs.. Annaya Nadar and Others;

20. A reading of the dictum laid down
in the above judgments would give a clear
120 INDIAN LAW REPORTS ALLAHABAD SERIES [2013
picture that the mechanical way of
interpreting the provisions made in the
statute will lead to defeat the object of the
Act. Here, when the object is to speedy
recovery of debt, by way of taking
possession on transferring the property in
favour of third party and issued a sale
certificate, it cannot be contended that
once the sale certificate is issued, physical
possession cannot be taken by the secured
creditors. Further, in this regard, a useful
reference could be placed on the judgment
reported in KOTTAKKAL CO-OP.URBAN
BANK
LTD
..vs..
BALAKRISHNAN
(2008(2)KLT 456). In that case, after
taking a symbolic possession under section
13(4) and selling the property in favour of
the auction purchaser, the secured creditor
approached the Chief Judicial Magistrate
seeking
the
assistance
for
taking
possession. The petition filed by the
secured creditor under section 14(1) was
dismissed by the Magistrate holding that
that the provision contained in section 14
only enables the secured creditor to seek
assistance of Court to take possession or
control of property for effecting sale. Since
the secured creditor had taken possession,
effected sale and issued sale certificate, the
provision cannot be invoked. Aggrieved
over the same, the secured creditor
preferred a writ petition before the High
Court. The High Court while dealing with
the case has held that there is no
stipulation in section 13 or elsewhere that
the right to transfer can be exercised only
after taking over the actual physical
possession or that the exercise of taking
over possession under section 13(4) shall
be of actual physical possession, resulting
in complete dispossession of the secured
debtor, de facto and de jure. The relevant
passage in paragraph 5 is extracted
hereunder: "5....to complete a transfer by a
secured creditor in favour of a third party,
the
necessary
pre-condition
is
that
possession is taken in terms of S.13(4) of
the Act. A close reading of S.13(4)(a)
would show that what is authorised
thereby is the taking of possession of the
secured asset, including the right to
transfer. While taking over of possession is
authorised and such taking over of
possession includes the taking over of the
right to transfer, there is no stipulation in
section 13 or elsewhere that the right to
transfer can be exercised only after taking
over the actual physical possession or that
the exercise of taking over possession
under section 13(4) shall be of actual
physical possession, resulting in complete
dispossession of the secured debtor, de
facto and de jure....At any rate, a secured
debtor, continuing to hold on de facto
possession on the ground of not having
been dispossessed, would only be one who
would have been given the advantage to
continue to hold on de facto possession for
the time during which different steps would
have
followed,
resulting
in
the
confirmation of sale in favour of a third
party auction purchaser. In the absence of
any jurisdictional requirement for de facto
possession to make a transfer in terms of
S.13(6), there is no legal or jurisdictional
error in the sale being held by the secured
creditor on the strength of de jure
possession. Such a sale or transfer would
have the complete support of S.13(6).

21. Therefore, in our opinion, in the
absence of any specific stipulation in
Section 13, the properties could be sold
only after taking physical possession and
also the combined reading of sections 13
and 14 with the background of the object
would show that it cannot be said that the
secured creditor cannot take actual
physical possession after issuing sale
certificates merely for the reason that the
1 All] Dilip Kumar Singh and another V. State of U.P. & others
121
language found in section 14 refers to the
secured creditor and secured asset.
Further more, as contended by the learned
counsel for the petitioner in W.P.No.10228
of 2009, that under sectio1n 13(10) even
after sale, the bank can approach the
Debts
recovery
Tribunal
by
filing
application having jurisdiction or a
competent court, for recovery of the
balance amount. Further, the contention of
the learned counsel for the banks that the
character of the secured creditor cannot be
said to be ceased by executing the sale
certificate also cannot be ignored."

14. Thus the submission of learned
counsel for the petitioners that application
filed by the Bank was not maintainable is
without any substance.

15.

Learned
counsel
for
the
petitioners has also placed reliance on two
judgments of the Madras High Court in the
cases
of
Elumalai
Chetty
and
Jagannadha vs. P. Balakrishna Mudaliar
reported in (1921)41 MLJ 297 and
Sundara
Ramanujam
Naidu
vs.
Sivalingam Pillai and another reported in
(1923)45 MLJ 431. In Elumalai Chetty's
case (supra) the Madras High Court was
considering Section 54 of the Transfer of
Property Act and held that transfer of
ownership of a immovable property falls
under Section 54 and will require a
registered instrument for the purpose. In
Sundara
Ramanujam
Naidu's
case
(supra) the Madras High Court was
considering a question as to what will be
the value of the suit brought by plaintiff to
enforce specific performance of a contract
to sell a shop by directing the defendant to
deliver a proper sale deed to him on his
paying the price into Court. We are of the
view that aforesaid two judgments of
Madras High Court have no relevance on
the issues which have arisen in the present
case since the present is a case where
power has been invoked by the Bank under
the 2002 Act which is a special statute and
rights and liabilities of the parties are to be
governed by special enactment i.e. the
Securitisation
and
Reconstruction
of
Financial Assets and Enforcement of
Security
Interest
Act,
2002
which
provision has a overriding effect by virtue
of Section 35 of the 2002 Act, hence no
help can be taken by the petitioners from
the aforesaid two judgments of the Madras
High Court.

16. In view of the aforesaid
discussions, the Issue No.1 is decided
holding that secured creditor is legally
entitled to take physical possession even
after execution of sale deed in favour of
auction purchaser and the application
under Section 14 of the 2002 Act by the
Bank before the District Magistrate was
fully maintainable. The Issue No.1 and 2
are answered accordingly.

17. The Issue No.3 is as to whether
after filing of application under Section 17
of the 2002 Act the Bank's power to take
measure under Section 13(4) is suspended.
As noticed above, the Bank has proceeded
with the auction proceeding and sale
certificate was issued on 29th June, 2011
i.e. much before filing of the application by
the petitioner under Section 17 of the 2002
Act which was filed on 8th July, 2011.
Thus factually the issue does not arise.
However, the issue having been raised, we
are of the view that the said issue needs
consideration in view of larger question
raised by the petitioners that after Section
17 application has been filed all measures
by the Bank have to be suspended.
122 INDIAN LAW REPORTS ALLAHABAD SERIES [2013

18. Section 17 of the 2002 Act,
which is relevant for the purpose, is quoted
below:-

"17. Right to appeal - (1) Any person
(including borrower), aggrieved by any of
the measures referred to in sub-section (4)
of section 13 taken by the secured creditor
or his authorised officer under this
Chapter,
may
make
an
application
alongwith such fee, as may be prescribed
to the Debts Recovery Tribunal having
jurisdiction in the matter within forty-five
days from the date on which such measure
had been taken:

PROVIDED that different fees may be
prescribed for making the application by
the borrower and the person other than the
borrower.

Explanation : For the removal of
doubts, it is hereby declared that the
communication of the reasons to the
borrower by the secured creditor for not
having accepted his representation or
objection or the likely action of the secured
creditor at the stage of communication of
reasons to the borrower shall not entitle
the person (including borrower) to make
an application to the Debts Recovery
Tribunal under this sub-section.

(2) The Debts Recovery Tribunal
shall consider whether any of the measures
referred to in sub-section (4) of section 13
taken
by
the
secured
creditor
for
enforcement of security are in accordance
with the provisions of this Act and the rules
made thereunder.

(3) If, the Debts Recovery Tribunal,
after
examining
the
facts
and
circumstances of the case and evidence
produced by the parties, comes to the
conclusion that any of the measures
referred to in sub-section (4) of section 13,
taken by the secured creditor are not in
accordance with the provisions of this Act
and the rules made thereunder, and
require restoration of the management of
the business to the borrower or restoration
of possession of the secured assets to the
borrower, it may by order, declare the
recourse to any one or more measures
referred to in sub-section (4) of section 13
taken by the secured creditors as invalid
and restore the possession of the secured
assets to the borrower or restore the
management of the business to the
borrower, as the case may be, and pass
such order as it may consider appropriate
and necessary in relation to any of the
recourse taken by the secured creditor
under sub-section (4) of section 13.

(4) If, the Debts Recovery Tribunal
declares the recourse taken by a secured
creditor under sub-section (4) of section
13, is in accordance with the provisions of
this Act and the rules made thereunder,
then, notwithstanding anything contained
in any other law for the time being in
force, the secured creditor shall be entitled
to take recourse to one or more of the
measures specified under sub-section (4)
of section 13 to recover his secured debt.

(5) Any application made under subsection (1) shall be dealt with by the Debts
Recovery Tribunal as expeditiously as
possible and disposed of within sixty days
from the date of such application:

PROVIDED that the Debts Recovery
Tribunal may, from time to time, extend the
said period for reasons to be recorded in
writing, so, however, that the total period
of pendency of the application with the
Debts Recovery Tribunal, shall not exceed
1 All] Dilip Kumar Singh and another V. State of U.P. & others
123
four months from the date of making of
such application made under sub-section
(1).

(6) If the application is not disposed
of by the Debts Recovery Tribunal within
the period of four months as specified in
sub-section (5), any part to the application
may make an application, in such form as
may be prescribed, to the Appellate
Tribunal for directing the Debts Recovery
Tribunal for expeditious disposal of the
application pending before the Debts
Recovery Tribunal and the Appellate
Tribunal may, on such application, make
an order for expeditious disposal of the
pending application by the Debts Recovery
Tribunal.

(7) Save as otherwise provided in this
Act, the Debts Recovery Tribunal shall, as
far as may be, dispose of the application in
accordance with the provisions of the
Recovery of Debts Due to Banks and
Financial Institutions Act, 1993 and the
rules made thereunder."

19.

Learned
counsel
for
the
petitioners referring to Section 17(4) of the
2002 Act contends that the said sub-section
contemplates declaration by Tribunal that
measures taken by the Bank are in
accordance with the provisions of the 2002
Act which clearly means that the Bank has
to stay his hands from proceeding any
further till a declaration is granted by the
Tribunal that measures taken by the Bank
are in accordance with the 2002 Act. The
scheme of the 2002 Act as delineated by
Section 17 is that a right of appeal has been
granted to a person including borrower
against the action taken by the Bank under
Section 13(4) before the Tribunal to
enquire as to whether action taken is in
accordance with the Act or is not in
accordance
with
the
Act.
The
consequences have also been provided in
sub-section (3) of Section 17 when
Tribunal holds that action taken is not in
accordance with the 2002 Act. The
Tribunal is clearly entitled to restore the
possession of the property to the borrower
if the action of the Bank is not in
accordance with the Act. The proceeding
under Section 17 of the 2002 Act has to be
concluded by the Tribunal in accordance
with the provisions of the Recovery of
Debts Due to Banks and Financial
Institutions Act, 1993 (Act No.51 of 1993).
Under the 1993 Act the Tribunal has
power to grant interim relief. Thus under
Section 17 of the 2002 Act also the
Tribunal can grant interim relief on an
application filed by the borrower. The
scheme of Section 17 of the 2002 Act does
not indicate that the said provisions contain
any automatic stay of the proceeding by
the Bank. Section 17 of the 2002 Act does
not indicate that as and when an
application under Section 17 is filed, the
operation of proceedings is suspended and
Bank cannot proceed any further.

20. The above question came for
consideration before a Full Bench of
Madras High Court in the case of Lakshmi
Shanker Mills (P) Ltd. & others vs.
Authorised
Officer/Chief
Manager,
Indian Bank & others. The Full Bench
noticed the aforesaid question which was
referred to it. It is useful to quote
paragraph 10, 13 and 17 of the said
judgment:-

"10. The first question is whether the
right of the bank to take proceedings under
Section 13(4) shall remain suspended on
filing an application under Section 17. The
second question concerns the jurisdiction
of the Debt Recovery Tribunal to impose a
124 INDIAN LAW REPORTS ALLAHABAD SERIES [2013
condition of deposit for grant of stay of
auction. Section 13(4) of the Securitisation
Act is pivotal to the whole controversy. It
provides that a secured creditor may
enforce any security interest without
intervention of the court or tribunal
irrespective of Section 69 or Section 69-A
of the Transfer of Property Act where
according to sub-section (2) of Section 13
the borrower is a defaulter in repayment of
the secured debt or any instalment of
repayment and further the debt standing
against him has been classified as a nonperforming asset by the secured creditor.
Sub-section (2) of Section 13 further
provides that before taking any steps in the
direction of realizing the dues, the secured
creditor must serve a notice in writing to
the borrower requiring him to discharge
the liabilities within a period of 60 days
failing which the secured creditor would
be entitled to take any of the measures as
provided in sub-section (4) of Section 13.
Sub-section (4) of Section 13 provides for
four measures which can be taken by the
secured creditor in case of non-compliance
with the notice served upon the borrower
namely, (a) to take possession of the
secured assets including the right to
transfer the secured assets by way of lease,
assignment or sale; (b) to take over the
management
of
the
secured
assets
including the right to transfer; (c) to
appoint a manager to manage the secured
assets which have been taken possession of
by the secured creditor; and (d) to require
any person who had acquired any secured
assets from the borrower or from whom
any money is due to the borrower to pay
the same as it may be sufficient to pay the
secured debt. Sub-section 3-A, which has
been inserted by the amendment, provides
that if on receipt of the notice under subsection (2), the borrower makes any
representation or raises any objection, the
secured creditor shall consider such
representation or objection and if the
secured creditor comes to the conclusion
that such representation or objection is not
acceptable
or
tenable,
he
shall
communicate within one week of receipt of
such representation or objection the
reasons
for
non-acceptance
of
the
representation
or
objection
to
the
borrower. The proviso to sub-section 3-A
provides that the reasons so communicated
or the likely action of the secured creditor
at the stage of communication of reasons
shall not confer any right upon the
borrower to prefer an application to the
Debts Recovery Tribunal under Section 17
or the Court of District Judge under
Section 17-A.