# M/s Mahesh Industries Pvt. Ltd & Ors v. The Kaur Vysya Bank Ltd

- **Citation:** (2019) 2 ILRA 1840
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2019-08-08
- **Case number:** Writ C No. 9731 of 2019
- **Bench:** Yashwant Varma
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/m-s-mahesh-industries-pvt-ltd-ors-v-the-kaur-vysya-bank-ltd-44681
- **Pages:** 15

## Headnote

Security Interest Act, 2002 - Section
13(2) - upon expiry of 60 days from the
date of notice u/s 13(2) and objections
u/s13 (3A) have been rejected - secured
creditor empowered to take possession.

B. Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Rules, 2002 - Rule 8(1)
- notice under Rule 8 is repository and
sufficient evidence of possession taken.

Held: - As this Court reads section 13 and
Rule 8, it finds no scope for introducing the
concept of a notice evidencing an intent of
taking possession or apprising the borrower of
the
proposed
date
of
taking
over
of
possession. (Para 13)

C. The Division Bench in Krishnegowda
appears to have found the imperative of
a prior notice being issued in order to
provide an opportunity to the borrower
to discharge the liability of the secured
creditor. However, in the considered
view of this Court, the view so taken
clearly misses the point that the Section
13 (2) notice has already apprised the
borrower of the obligation to discharge
the liability as claimed by the secured
creditor. It is only consequent to a
failure on his part to discharge the
liability or where his objections are
considered
and
rejected
that
the
provisions
of
Section-13
(4)
are
attracted. (Para 12)

Writ Petition rejected (E-9)

List of Cases Cited: -

## Text

_Characters 0–39,873 of 51,476. This is a partial read: ask again with offset=39873 for what follows._

1840 INDIAN LAW REPORTS ALLAHABAD SERIES

43. No order as to costs.
----------

(2019)10ILR A 1840

ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 08.08.2019

BEFORE

THE HON'BLE YASHWANT VARMA, J.

Writ C No. 9731 of 2019

M/s Mahesh Industries Pvt. Ltd &
Ors. ...Petitioners
Versus
The Kaur Vysya Bank Ltd. ...Respondent

Counsel for the Petitioners:
Sri Manu Khare.

Counsel for the Respondent:
Sri Maneesh Mehrotra, Sri D.K. Pathak, Sri
Rahul Tyagi, Sri Shashank Pathak.

A. Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Act, 2002 - Section
13(2) - upon expiry of 60 days from the
date of notice u/s 13(2) and objections
u/s13 (3A) have been rejected - secured
creditor empowered to take possession.

B. Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Rules, 2002 - Rule 8(1)
- notice under Rule 8 is repository and
sufficient evidence of possession taken.

Held: - As this Court reads section 13 and
Rule 8, it finds no scope for introducing the
concept of a notice evidencing an intent of
taking possession or apprising the borrower of
the
proposed
date
of
taking
over
of
possession. (Para 13)

C. The Division Bench in Krishnegowda
appears to have found the imperative of
a prior notice being issued in order to
provide an opportunity to the borrower
to discharge the liability of the secured
creditor. However, in the considered
view of this Court, the view so taken
clearly misses the point that the Section
13 (2) notice has already apprised the
borrower of the obligation to discharge
the liability as claimed by the secured
creditor. It is only consequent to a
failure on his part to discharge the
liability or where his objections are
considered
and
rejected
that
the
provisions
of
Section-13
(4)
are
attracted. (Para 12)

Writ Petition rejected (E-9)

List of Cases Cited: -

1. Standard Chartered Bank Vs Noble Kumar &
ors, (2013) 9 SCC 620

2. K R Krishnegowda & anr. Vs Chief
Manager/Authorised Officer, Kotak Mahindra
Bank, (2012) AIR (Kar.)116

3. Nobel Kumar & Hindon Forge Pvt. Ltd. &
anr. Vs St. of U.P., (2019) 2 SCC 198

4. Mardia Chemicals Ltd. Vs UOI, (2004) 4 SCC 311

5.NCML Industries Ltd. Vs Debt Recovery
Tribunal, AIR 2018 Allahabad 131

(Delivered by Hon'ble Yashwant Varma, J.)

1. Heard Sri Manu Khare, learned
counsel for the petitioners and Sri D.K.
Pathak, learned Senior Advocate assisted by
Sri Rahul Tyagi and Sri Shashank Pathak,
appearing for the respondent Bank.

2. This petition impugns an order
dated 30 January 2019 passed by the Debt
Recovery Tribunal, Allahabad [DRAT]
on an appeal preferred by the respondent
Bank
under
Section
18
of
the
2 All. M/s Mahesh Industries Pvt. Ltd. & Ors. Vs The Kaur Vysya Bank Ltd.
1841
Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest Act, 2002 [hereinafter
referred to as the "2002 Act"]. The appeal
itself was directed against an order dated
19 May 2018 passed by the DRT,
Lucknow [DRT] allowing a Securitisation
Application filed by the petitioners here.
The DRT by its order of 19 May 2018
while
allowing
the
Securitisation
Application set aside the possession
notices dated 12, 19 and 26 July 2017
issued under Rule 8 of the Security
Interest (Enforcement) Rules, 2002
[hereinafter referred to as the "2002
Rules"] as also the demand notice of 19
April 2017 referable to Section 13(2) of
the 2002 Act.

3. The facts on which there is no
dispute are as follows. The petitioner Nos.
1, 4 and 5 are the original borrowers. The
petitioner Nos. 2 and 3 are the guarantors.
The respondent Bank is stated to have
granted various credit facilities to the
petitioners from time to time. In order to
secure the credit facilities so sanctioned
and disbursed, equitable mortgages were
also created in respect of properties
situate at Meerut, Karnal, NOIDA and
Gandhidham (Gujarat). The loan account
of the petitioners was classified as a non
performing asset on 31 March 2017. The
respondent Bank on 19 April 2017 issued
a notice under Section 13(2) of the 2002
Act calling upon the petitioners to repay a
sum of Rs. 92,41,11,057.49 along with
interest thereon at the rate of 14.55% per
annum. Since the terms of the notice
under Section 13(2) were not complied
with, the Bank proceeded to issue
possession notices on 12, 19 an 26 July
2017 evidencing the taking over of
possession in terms of Section 13(4) of
the 2002 Act. After taking symbolic
possession, the respondent Bank issued a
sale notice dated 11 August 2017 but the
auction sale could not materialise for want
of bidders. Aggrieved by the possession
notices issued as well as the notice of
sale, the petitioners filed a Securitisation
Application before the DRT on 1
September 2017. It was this Securitisation
Application which was allowed by the
DRT on 19 May 2018 and formed subject
matter of challenge laid by the Bank
before the DRAT. The DRAT in terms of
its impugned order of 30 January 2019
has proceeded to record that despite the
notice under Section 13(2) of the Act
having been duly served, no objections
were preferred as a consequence of which
the respondent Bank proceeded to issue
the possession notices. It further noted
that although requisite details of service
of the notice under Section 13(2) of the
Act had been duly brought on record by
the Bank before the DRT, no objection
was raised by the petitioners here to the
same. The DRAT has further found that
the three possession notices were duly
affixed on the premises of the secured
assets and that the requirements of Rule 8
of the 2002 Rules complied with.
Referring to the decision of the Supreme
Court in Standard Chartered Bank Vs.
Noble Kumar and others1, the DRAT
held that after issuance of the demand
notice under Section 13(2) of the 2002
Act and on a failure of the debtors to
liquidate the dues as claimed, it is open to
the secured creditor to take symbolic or
physical possession without issuing any
prior or further notice. It essentially held
that there is no legal requirement of
issuance of a notice before proceeding to
take possession. While dealing with the
issue of compliance with Rule 8, it has
significantly recorded that the petitioners
did not deny the receipt, publication and
1842 INDIAN LAW REPORTS ALLAHABAD SERIES
affixation of the possession notices.
Having recorded the conclusions as
aforesaid, it proceeded to allow the appeal
of the respondent Bank and set aside the
order of the DRT dated 19 May 2018.

4. Sri Manu Khare, learned counsel
appearing in support of the present
petitioners has addressed the following
two contentions. His first submission was
that the respondent Bank was obliged in
law to issue a notice to the petitioners
indicating its intent of taking over
physical possession of the secured assets.
According to Sri Khare, the respondent
Bank was obliged to place the petitioners
on notice of the date when possession of
the secured assets was intended to be
taken after the expiry of the period
specified in the notice issued under
Section 13(2) of the 2002 Act. According
to Sri Khare this is clearly a requirement
which flows from the provisions made in
Section 13(4) of the 2002 Act read with
Rule 8 of the 2002 Rules. This submission
rests solely upon a decision rendered by a
Division Bench of the Karnataka High
Court in K R Krishnegowda and
another Vs. Chief Manager/Authorised
Officer, Kotak Mahindra Bank 2. Sri
Khare has pressed in aid the following
observations as appearing in paragraphs
13 and 14 of the report.:-

"13. On a conspectus reading of
sub-section (4) of section and section with
rule 8, the question that would arise is, as
to the stage at which notice under rule 8
would have to be issued, as the contention
of counsel for the respondent is that the
notice regarding possession would be
issued after an order under section is
passed and possession is taken and before
sale. When once there is non-compliance
of the demand made under sub-section (2)
of section , steps could be initiated under
sub-section (4) by taking possession of
the secured asset. The question is, as to
whether the borrower ought to know as to
when exactly possession of the secured
asset would be taken, when once the
demand under sub-section (2) of section is
not complied with by the borrower.
Having regard to sub-section (13) read
with sub-section (2) of section would
imply that the receipt of notice under subsection (2) results in a virtual attachment
of the secured asset. If the demand made
in sub-section (2) of section is not
complied with and the representation as
well as the objections filed by the
borrower are also not accepted and
communicated to the borrower, then in
that case, steps could be initiated under
sub-section (4) of section . Having regard
to the fact that sub-section (6) of section
enables a secured creditor to transfer the
secured asset after taking possession
would imply that the possession of the
secured asset vests with the secured
creditor prior to any such transfer. The
procedure for taking possession or control
of the secured asset by the secured
creditor is envisaged in section after the
date mentioned in the possession notice at
which stage, it is not necessary to actually
inform or indicate to the borrower, the
taking of possession by the secured
creditor. Section in fact does not prescribe
an opportunity of hearing the borrower
before an order is passed with regard to
taking of possession. But we have held
that if possession has to be taken by the
secured creditor, then in that event, the
borrower must be informed or intimated
about the taking of possession, more
precisely, the actual date on which
possession would be taken over from the
borrower by the secured creditor which
would have to be indicated to the former.
2 All. M/s Mahesh Industries Pvt. Ltd. & Ors. Vs The Kaur Vysya Bank Ltd.
1843
It is in this regard, that in so far as
immovable property, is concerned, subrules (1) and (2) of rule 8 prescribe
notices or intimation to the borrower in
two ways : (i) by delivery of possession
notice; and (ii) by newspaper publication,
clearly indicating the date on which
possession of the secured asset would be
taken by the secured creditor. If on the
date indicated in the possession notice,
the secured creditor is unable to take
possession of the secured asset, then in
that case, recourse may be had to section
14 of the Act, at which stage a further,
notice to the borrower is not envisaged,
under the said section.

14. Therefore, what emerges is
the mandatory requirement under the Act
read with the Rules, that in order to
enable the borrower to know the date on
which possession would be taken by the
secured creditor, sub-rules (1) and (2) of
rule 8 would have to be complied with by
issuance of notices indicating the date on
which possession would be taken. There
is another purpose for issuing the notice
prior to taking possession and that is, to
enable the borrower to discharge the
liability to the secured creditor. Also a
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 can pay the
secured creditor, so much of the money as
is sufficient to pay the secured debt as per
clause (d) of sub-section (4) of section 13
read with sub-section (5) thereof. We
have also borne in mind the fact that on
an application being filed under section
14 of the Act before the Magistrate, there
is no provision for issuance of notice to
the borrower before an order to take
possession is issued. We are, therefore, of
the considered view that before initiating
action under sub-section (4) of section 13
of the Act, the issuance of notice as per
sub-rules (1) and (2) of rule 8 has to be
complied with indicating the date on
which possession of the property would
be taken from the borrower by the secured
creditor. If on the said date possession of
the secured asset cannot be taken or it is
not surrendered by the borrower, then the
secured creditor can take recourse to
section 14 of the Act and take possession
of the secured immovable property, of
course, we hasten to add that the notices
issued under sub-rules (1) and (2) of rule
8 cannot be assailed per se as the purpose
of issuance of such notices is only to
indicate the date of taking possession."
(emphasis supplied)

5. The second submission which was
canvassed for the consideration of the Court
by Sri Khare related to the validity of the
possession notices issued by the respondent
Bank. In this respect, it was contended that
the notices under Rule 8 were published in
the Business Standard and Economic Times
which were not leading newspapers having
sufficient
circulation
in
the
locality
concerned. Sri Khare argued that the two
newspapers were generally read by a
specific class of readers and were not liable
to be recognised as newspapers having
sufficient circulation in the locality. Sri
Khare also drew the attention of the Court
to the averments made in a supplementary
affidavit to assert that the papers did not
enjoy wide circulation. It was further
contended that the respondent Bank had
failed to prove that the possession notices
had been duly affixed on the premises of the
secured assets thus violating the mandatory
provisions of Rule 8(1) and (2) of the 2002
Rules.

6. Countering the submissions, Sri
Pathak, leaned Senior counsel appearing
1844 INDIAN LAW REPORTS ALLAHABAD SERIES
for the respondent Bank, has submitted
that as is evident from the recordal of
facts by the DRAT, the petitioners did not
dispute that the notice under Section 13(2)
of the 2002 Act despite being duly served
was not responded to. Sri Pathak has
sought to highlight the fact that despite
the Bank having brought on record
evidence of due service of the notice
under Section 13(2) of the Act as well as
those under Rule 8, these aspects were
neither denied nor the averments made in
that
respect
controverted
by
the
petitioners.
Sri
Pathak
has
further
submitted that the DRT committed a gross
illegality in setting aside the notice under
Section 13(2) of the 2002 Act dated 19
April 2017 when that did not even form
subject matter of challenge in the
Securitisation Application preferred by
the petitioners. Sri Pathak has further
highlighted and underlined the fact that
the petitioners had conceded the due
service of the possession notices and
consequently it was not permissible for
them to contend before this Court that the
provisions of Rule 8 had not been
complied with.

7. Turning to the contentions as
urged on behalf of the petitioners of a
prior notice being issued before the taking
of possession, Sri Pathak submitted that
the decision in Krishnegowda pales into
insignificance in light of the subsequent
judgments rendered by the Supreme Court
in Nobel Kumar and Hindon Forge
Private Limited and another Vs. State
of U.P.3 Sri Pathak contends that once the
statutory period prescribed under Section
13(2) comes to an end or when the Bank
has decided and rejected the objections, if
any, preferred by the debtor which ever be
later, it is open to the secured creditor to
take possession of the secured assets
complying with the provisions made in
Rule 8. Sri Pathak submits that neither
Section 13(4) of the 2002 Act nor Rule 8
of the 2002 Rules contemplates or
envisages a prior notice being given
apprising the debtors of the proposed date
of taking of possession. Sri Pathak has
consequently urged that the order of the
DRAT is liable to be upheld and the
instant writ petition dismissed. It is these
rival submissions which consequently fall
for determination.

8. The principal and underlying
theme of the contention addressed by the
petitioners with respect to a prior notice
appears to be a perceived requirement in
law of a notice being issued after the
expiry of 60 days of the Section 13(2)
notice and the taking over of possession
under Section 13(4). As noticed above,
the petitioners have sought to canvass that
before the taking of possession under
Section 13(4), the secured creditor is
obliged to apprise the debtor of its intent
and the date of taking over possession.
This submission rests entirely on the
decision of the Karnataka High Court
rendered
in
Krishnegowda.
In
Krishnegowda, their Lordships took the
view that the debtor must be informed and
intimated of the intent of taking over
possession.
This
prior
notice
was
considered as a requirement flowing from
a construction of Rule 8 on the basis of
which their Lordships held that the
borrowers would be enabled to discharge
the liability of the secured creditor. It was
in that backdrop that Krishnegowda held
that before initiating action under Section
13(4), the issuance of a notice under Rule
8 had to be complied with by indicating
the date on which possession of the
properties would be taken from the
borrower by the secured creditor. This
2 All. M/s Mahesh Industries Pvt. Ltd. & Ors. Vs The Kaur Vysya Bank Ltd.
1845
Court, with due respect, finds itself unable
to sustain or follow the line of reasoning
as adopted for the following reasons.

9. In terms of Section 13(2) of the
2002 Act, the secured creditor is required
to place the borrower on notice of his
liability to discharge the outstanding in an
account which has been classified as a
non performing asset. In case the
borrower fails to comply with that
demand within 60 days from the date of
the notice, the secured creditor becomes
legally entitled to exercise all or any of
the rights enumerated in sub-section (4) of
Section 13. The taking of possession of
the secured assets including the right
transfer it by way of lease, assignment or
sale is one of the measures specified in
sub-section (4). The Legislature by virtue
of Amending Act 1 of 2013 had inserted
Sub-section (3A) enjoining the secured
creditor to consider and decide any
representation or objection that the
borrower may chooses to make in respect
of the notice issued under Section 13(2).
This
legislative
amendment
was
principally introduced in light of the
decision rendered by the Supreme Court
in Mardia Chemicals Ltd. Vs. Union of
India 4. If one bears in mind the various
stages of the proceedings under Section
13 of the Act, it is manifest that the action
of enforcement of a security interest
created
in
favour
of
the
creditor
commences with the notice issued under
Section 13(2). The statute constructs a
window of 60 days within which a
borrower is entitled to respond to the
notice and show cause why he is not
liable to pay the amounts as claimed by
the secured creditor. By virtue of the
provisions made in sub-section (3A), the
representation or objection that may be
chosen to be made has to necessarily be
decided by the secured creditor and a
decision thereon communicated within a
period of 15 days from the receipt of such
representation or objection. The secured
creditor is statutorily empowered to take
recourse to one or more of the measures
specified
in
Sub-section
(4)
only
thereafter. The provisions of sub-section
(4) come into play and the secured
creditor is empowered to enforce the
measures specified therein only when a
debtor fails to discharge his liability in
full or where the representation or
objection made has come to be rejected. It
is therefore evident that upon the expiry
of 60 days from the date of the notice
under Section 13(2) and once the
objections, if any, preferred under subsection (3A) have been rejected, the
statute in unambiguous terms empowers
the secured creditor to take possession.

10. The taking of possession is
governed by the provisions made in Rule
8 of the 2002 Rules. Rule 8(1) prescribes
that the authorised officer shall take
possession by delivery of a possession
notice prepared in accordance with the
format prescribed in Appendix IV. The
possession notice prescribed in Appendix
IV carries the recital of the fact that
despite the expiry of 60 days of the notice
under Section 13(2), the borrower has
failed to repay the amount. It also records
the consequential fact of the authorised
officer having taken possession of the
secured assets in exercise of powers
conferred under Section 13(4). On a
conjoint reading of Section 13 and Rule 8,
it is therefore, manifest and abundantly
clear that no notice is envisaged in law to
intervene the Section 13(2) notice and the
possession notice issued under Rule 8(1).
This is evident from a plain construct of
the scheme of the 2002 Act when it
1846 INDIAN LAW REPORTS ALLAHABAD SERIES
empowers the creditor to enforce a
measure specified in sub-section (4) upon
a failure of the borrower to discharge the
liability. The borrower, it becomes
relevant to note, is already made aware by
the statute of the measures which are
likely to be enforced in case he fails to
discharge the liability within 60 days of
the notice under Section 13(2) or where
the objections, if any, preferred against
that notice come to be rejected and a
decision thereon communicated to him.
On a plain reading of the provisions of the
2002 Act, therefore, this Court finds no
requirement or obligation on the creditor
to intimate the borrower of the proposed
date of taking of possession. The Division
Bench in Krishnegowda appears to have
found the imperative of a prior notice
being issued in order to provide an
opportunity to the borrower to discharge
the liability of the secured creditor.
However, in the considered view of this
Court, the view so taken clearly misses
the point that the Section 13(2) notice has
already apprised the borrower of the
obligation to discharge the liability as
claimed by the secured creditor. It is only
consequent to a failure on his part to
discharge the liability or where his
objections are considered and rejected
that the provisions of Section 13 (4) are
attracted. The statute, neither on its plain
language
nor
in
its
intendment,
contemplates a further notice intervening
those issued under sub sections (2) and
(4) of Section 13. Regard must also be
had to the fact that the notice under Rule
8 itself is the repository and evidence of
possession having been taken.

11. In Noble Kumar, the Supreme
Court was called upon to consider the
validity of a decision rendered by the
Madras High Court which had held that
the guarantor must make an attempt to
take possession of the asset under Section
13(4) before invoking the provisions of
Section 14 of the 2002 Act. Dealing with
the correctness of that view the Supreme
Court made the following pertinent
observations:

"26.
It
is
in
the
abovementioned background of the legal frame
of Sections 13 and 14, we are required to
examine
the
correctness
of
the
conclusions recorded by the High Court.
Having regard to the scheme of Sections
13 and 14 and the object of the enactment,
we do not see any warrant to record the
conclusion that it is only after making an
unsuccessful attempt to take possession of
the secured asset, a secured creditor can
approach the Magistrate. No doubt that a
secured creditor may initially resort to the
procedure under Section 13(4) and on
facing resistance, he may still approach
the Magistrate under Section 14. But, it is
not mandatory for the secured creditor to
make attempt to obtain possession on his
own before approaching the Magistrate
under Section 14. The submission that
such a construction would deprive the
borrower of a remedy under Section 17 is
rooted in a misconception of the scope of
Section 17.

27. The "appeal" under Section
17 is available to the borrower against any
measure taken under Section 13(4).
Taking possession of the secured asset is
only one of the measures that can be taken
by the secured creditor. Depending upon
the nature of the secured asset and the
terms and conditions of the security
agreement, measures other than taking the
possession of the secured asset are
possible under Section 13(4). Alienating
the asset either by lease or sale etc. and
2 All. M/s Mahesh Industries Pvt. Ltd. & Ors. Vs The Kaur Vysya Bank Ltd.
1847
appointing a person to manage the
secured asset are some of those possible
measures. On the other hand, Section 14
authorises the Magistrate only to take
possession of the property and forward
the asset along with the connected
documents to the borrower. Therefore, the
borrower is always entitled to prefer an
"appeal" 15 under Section 17 after the
possession of the secured asset is handed
over to the secured creditor. Section
13(4)(a) declares that the secured creditor
may take possession of the secured assets.
It does not specify whether such a
possession is to be obtained directly by
the secured creditor or by resorting to the
procedure under Section 14. We are of the
opinion that by whatever manner the
secured creditor obtains possession either
through the process contemplated under
Section 14 or without resorting to such a
process obtaining of the possession of a
secured asset is always a measure against
which a remedy under Section 17 is
available."

12. Dealing with the provisions
comprised in Rule 8, it held as follows:-

"35. Therefore, there is no
justification for the conclusion that the
receiver appointed by the Magistrate is
also required to follow Rule 8 of the
Security Interest (Enforcement) Rules,
2002. The procedure to be followed by
the receiver is otherwise regulated by law.
Rule 8 provides for the procedure to be
followed by secured creditor taking
possession of the secured asset without
the intervention of Court. Such a process
was unknown prior to the SARFAESI
Act. So, specific provision is made under
Rule 8 to ensure transparency in taking
such possession. We do not see any
conflict between different procedures
prescribed by law for taking possession of
the secured asset. The finding of the High
Court in our view is unsustainable.

36. Thus, there will be three
methods for the secured creditor to take
possession of the secured assets:

36.1 (i) The first method would
be where the secured creditor gives the
requisite notice under Rule 8(1) and
where he does not meet with any
resistance. In that case, the authorised
officer will proceed to take steps as
stipulated under Rule 8(2) onwards to
take possession and thereafter for sale of
the secured assets to realise the amounts
that are claimed by the secured creditor.

36.2 (ii) The second situation
will arise where the secured creditor
meets with resistance from the borrower
after the notice under Rule 8(1) is given.
In that case he will take recourse to the
mechanism provided under Section 14 of
the Act viz. making application to the
Magistrate. The Magistrate will scrutinize
the application as provided in Section 14,
and then if satisfied, appoint an officer
subordinate to him as provided under
Section 14 (1)(A) to take possession of
the assets and documents. For that
purpose the Magistrate may authorise the
officer concerned to use such force as
may be necessary. After the possession is
taken the assets and documents will be
forwarded to the secured creditor.

36.3 (iii) The third situation will
be one where the secured creditor
approaches the Magistrate concerned
directly under Section 14 of the Act. The
Magistrate will thereafter scrutinize the
application as provided in Section 14, and
then if satisfied, authorise a subordinate
officer to take possession of the assets and
documents and forwards them to the
secured creditor as under Clause (ii)
above.
1848 INDIAN LAW REPORTS ALLAHABAD SERIES

36.4. In any of the three
situations, after the possession is handed
over
to
the
secured
creditor,
the
subsequent specified provisions of Rule 8
concerning the preservation, valuation
and sale of the secured assets,, and other
subsequent rules from the Security
Interest (Enforcement) rules, 2002, shall
apply."

13. As is evident from the
construction of Rule 8 as expounded by
the Supreme Court in Noble Kumar, the
provisions of that Rule itself embody the
procedure to be followed by a secured
creditor seeking to take possession
without the intervention of the Court. It is
therefore evident that a possession notice
effected in accordance with the provisions
of Rules 8(1) and (2) is sufficient
evidence in itself of possession having
been taken by the creditor. The act of
taking over of possession in terms of the
statutory provisions made in the 2002 Act
and the 2002 Rules is complete the
moment the possession notice is delivered
and published in accordance therewith. It
is therefore, clear that no obligation,
statutory or otherwise, stands placed upon
the creditor to apprise the borrower of its
intent of taking possession. As this Court
reads Section 13 and Rule 8, it finds no
scope for introducing the concept of a
notice evidencing an intent of taking
possession or apprising the borrower of
the proposed date of taking over of
possession.

14. Regard must also be had to the
fact that possession under the 2002 Act
can be both constructive as well as actual.
A Full Bench of this Court in NCML
Industries Ltd Vs. Debt Recovery
Tribunal5 had taken the view that
possession under the provisions of the
2002 Act has to necessarily be recognised
as
actual
physical
possession.
The
correctness of that decision fell for
consideration before the Supreme Court
in Hindon Forge. Dealing with the issues
raised, the Supreme Court held as under:-

"25. When we come to Section
13(4)(a), what is clear is that the mode of
taking possession of the secured assets of
the borrower is specified by Rule 8.
Under Section 38 of the Act, the Central
Government may make Rules to carry out
the provisions of the Act. One such Rule
is Rule 8. Rule 8(1) makes it clear that
"the authorised officer shall take or cause
to be taken possession". The expression
"cause to be taken" only means that the
authorised officer need not himself take
possession, but may, for example, appoint
an agent to do so. What is important is
that such taking of possession is effected
Under Sub-rule (1) of Rule 8 by
delivering a possession notice prepared in
accordance with Appendix IV of the 2002
Rules, and by affixing such notice on the
outer door or other conspicuous place of
the property concerned. Under Sub-rule
(2), such notice shall also be published
within 7 days from the date of such taking
of possession in two leading newspapers,
one in the vernacular language having
sufficient circulation in the locality. This
is for the reason that when we come to
Appendix IV, the borrower in particular,
and the public in general is cautioned by
the said possession notice not to deal with
the property as possession of the said
property has been taken. This is for the
reason that, from this stage on, the
secured asset is liable to be sold to realise
the debt owed, and title in the asset
divested from the borrower and complete
title given to the purchaser, as is
mentioned in Section 13(6) of the Act.
2 All. M/s Mahesh Industries Pvt. Ltd. & Ors. Vs The Kaur Vysya Bank Ltd.
1849
There is, thus, a radical change in the
borrower dealing with the secured asset
from this stage. At the stage of a Section
13(2) notice, Section 13(13) interdicts the
borrower from transferring the secured
asset (otherwise than in the ordinary
course of his business) without prior
written consent of the secured creditor.
But once a possession notice is given
Under Rule 8(1) and 8(2) by the secured
creditor to the borrower, the borrower
cannot deal with the secured asset at all as
all further steps to realise the same are to
be taken by the secured creditor under the
2002 Rules.

26.
Section
19,
which
is
strongly relied upon by Shri Ranjit
Kumar,
also
makes
it
clear
that
compensation is receivable Under Section
19 only when possession of secured assets
is not in accordance with the provision of
this Act and Rules made thereunder. The
scheme of Section 13(4) read with Rule
8(1) therefore makes it clear that the
delivery of a possession notice together
with affixation on the property and
publication is one mode of taking
"possession" Under Section 13(4). This
being the case, it is clear that Section
13(6) kicks in as soon as this is done as
the expression used in Section 13(6) is
"after taking possession". Also, it is clear
that Rule 8(5) to 8(8) also kick in as soon
as "possession" is taken Under Rule 8(1)
and 8(2). The statutory scheme, therefore,
in the present case is that once possession
is taken Under Rule 8(1) and 8(2) read
with Section 13(4)(a), Section 17 gets
attracted, as this is one of the measures
referred to in Section 13 that has been
taken by the secured creditor under
Chapter III."

15. As is evident from the extracts
of
the
decision
in
Hindon
Forge
reproduced herein above, the delivery of a
possession
notice
together
with
its
affixation on the property and its
publication was recognised as one of the
modes of taking of possession under
Section 13(4). Dealing further with the
nature of possession contemplated under
the Act, their Lordships held as under:-

"32. Another argument that was
raised by learned senior Counsel for the
Respondents is that
the taking of
possession under Section 13(4)(a) must
mean actual physical possession or
otherwise, no transfer by way of lease can
be made as possession of the secured
asset would continue to be with the
borrower when only symbolic possession
is taken. This argument also must be
rejected for the reason that what is
referred to in Section 13(4)(a) is the right
to transfer by way of lease for realising
the secured asset. One way of realising
the secured asset is when physical
possession is taken over and a lease of the
same is made to a third party. When
possession is taken under Rule 8(1) and
8(2), the asset can be realised by way of
assignment or sale, as has been held by us
hereinabove. This being the case, it is
clear that the right to transfer could be by
way of lease, assignment or sale,
depending upon which mode of transfer
the secured creditor chooses for realising
the secured asset. Also, the right to
transfer by way of assignment or sale can
only be exercised in accordance with
Rules 8 and 9 of the 2002 Rules which
require various pre-conditions to be met
before sale or assignment can be effected.
Equally, transfer by way of lease can be
done in future in cases where actual
physical possession is taken of the
secured asset after possession is taken
under Rule 8(1) and 8(2) at a future point
1850 INDIAN LAW REPORTS ALLAHABAD SERIES
in time. If no such actual physical
possession is taken, the right to transfer
by way of assignment or sale for realising
the
secured
asset
continues.
This
argument
must
also,
therefore,
be
rejected."

16. It was further observed:-

"35. We now come to some of
the decisions of this Court. In Transcore
v. Union of India and Anr., (2008) 1
SCC 125, this Court formulated the
question which arose before it as follows:

"1. A short question of public
importance
arises
for
determination,
namely, whether withdrawal of OA in
terms of the first proviso to Section 19(1)
of the DRT Act, 1993 (inserted by
amending Act 30 of 2004) is a condition
precedent to taking recourse to the
Securitisation
and
Reconstruction
of
Financial Assets and Enforcement of
Security Interest Act, 2002 ("the NPA
Act", for short)."

To this, the answer given is in
paragraph 69, which is as follows:

"69. For the above reasons, we
hold that withdrawal of the OA pending
before DRT under the DRT Act is not a
precondition for taking recourse to the
NPA Act. It is for the bank/FI to exercise
its discretion as to cases in which it may
apply for leave and in cases where they
may not apply for leave to withdraw. We
do
not
wish
to
spell
out
those
circumstances because the said first
proviso to Section 19(1) is an enabling
provision, which provision may deal with
myriad circumstances which we do not
wish to spell out herein."

Thereafter, the Court went on to
discuss
whether
recourse
to
take
possession of secured assets of the
borrower in terms of Section 13(4) of the
Act would comprehend the power to take
actual possession of immovable property.
In the discussion on this point in
paragraph 71 of the judgment, learned
Counsel on behalf of the borrowers made
an extreme submission which was that the
borrower who is in possession of
immovable property cannot be physically
dispossessed at the time of issuing the
notice under Section 13(4) of the Act so
as to defeat adjudication of his claim by
the Debts Recovery Tribunal Under
Section 17 of the Act and that therefore,
physical possession can only be taken
after the sale is confirmed in terms of
Rule 9(9) of the 2002 Rules. This
submission was rejected by stating that
the word "possession" is a relative
concept and that the dichotomy between
symbolic and physical possession does
not find place under the Act. Having said
this, the Court went on to examine the
2002 Rules and held:

"74. ... Thus, Rule 8 deals with
the stage anterior to the issuance of sale
certificate and delivery of possession
Under Rule 9. Till the time of issuance of
sale certificate, the authorised officer is
like a Court Receiver Under Order 40
Rule 1 Code of Civil Procedure. The
Court
Receiver
can
take
symbolic
possession and in appropriate cases where
the Court Receiver finds that a third-party
interest is likely to be created overnight,
he can take actual possession even prior
to the decree. The authorised officer
Under Rule 8 has greater powers than
even a Court Receiver as security interest
in the property is already created in
favour of the banks/FIs. That interest
needs to be protected. Therefore, Rule 8
provides that till issuance of the sale
certificate Under Rule 9, the authorised
officer shall take such steps as he deems
fit to preserve the secured asset. It is well
2 All. M/s Mahesh Industries Pvt. Ltd. & Ors. Vs The Kaur Vysya Bank Ltd.
1851
settled that third-party interests are
created overnight and in very many cases
those third parties take up the defence of
being a bona fide purchaser for value
without notice. It is these types of
disputes which are sought to be avoided
by Rule 8 read with Rule 9 of the 2002
Rules. In the circumstances, the drawing
of dichotomy between symbolic and
actual possession does not find place in
the scheme of the NPA Act read with the
2002 Rules."

If the whole of paragraph 74 is
read together with the extracted passage,
it becomes clear that what is referred to in
the extracted passage is the procedure
provided by Rule 8(3). It is clear that the
authorised
officer's
powers,
once
possession is taken under Rule 8(3),
include taking of steps for preservation
and protection of the secured assets which
is referred to in the extracted portion.
Thus, the final conclusion by the Bench,
though general in nature, is really
referable to possession that is taken under
Rule 8(3) of the 2002 Rules. Whether
possession taken under Rule 8(1) and 8(2)
is called symbolic possession or statutory
possession, the fact remains that Rule 8(1)
and Rule 8(2) specifically provide for a
particular mode of possession taken under
Section 13(4)(a) of the Act. This cannot
be wished away by an observation made
by this Court in a completely different
context in order to repel an extreme
argument. This Court was only of the
opinion that the extreme argument made,
as reflected in paragraph 71 of the
judgment, would have to be rejected. This
judgment therefore does not deal with the
problem before us: namely, whether a
Section 17(1) application is maintainable
once possession has been taken in the
manner specified Under Rule 8(1) of the
2002 Rules.

37. In Canara Bank v. M.
Amarender Reddy and Anr., (2017) 4
SCC 735, this Court after referring to
Mathew Varghese v. M.