Saturday, October 18, 2014

Full Text of Order of SC On Selvi J.Jayalalithaa's(Bail ) SLP cr


we suspend the sentence and direct that the petitioners, (i) Selvi J.Jayalalithaa, (ii) Tmt.N.Sasikala, (iii) Mr.V.N. Sudhakaran, and (iv) TMT. J.Elasvarasi be released on bail on executing a bond with two solvent sureties by each of them to the satisfaction of the 36th Addl. City Civil & Sessions Judge (Spl. Court for Trial of Criminal Cases against Kum. Jayalalitha & Ors) at Bangalore. = IA No. 1/2014 in Crl.Appeal No. 835 of 2014 passed by the High Court Of Karnataka At Bangalore) J JAYALALITHAA Petitioner(s) VERSUS STATE OF TAMIL NADU REP. BY THE SUPERINTENDENT OF POLICE DV AND AC, CHENNAI Respondent(s) (With office report) = 2014- Oct. Moth – http://supremecourtofindia.nic.in/outtoday/sr790014p-2014_10_17.pdf

we suspend
the sentence and direct that the
petitioners, 
(i) Selvi J.Jayalalithaa, 
(ii) Tmt.N.Sasikala, 
(iii) Mr.V.N. Sudhakaran,
and 
(iv) TMT. J.Elasvarasi be released on
bail on executing a bond with two solvent
sureties by each of them to the
satisfaction of the 36th Addl. City Civil &
Sessions Judge (Spl. Court for Trial of
Criminal Cases against Kum. Jayalalitha &
Ors) at Bangalore. 
1
ITEM NO.65 COURT NO.1 SECTION IIB
S U P R E M E C O U R T O F I N D I A
RECORD OF PROCEEDINGS
Petition for Special Leave to Appeal (Crl.) No. 7900/2014
(Arising out of impugned final judgment and order dated
07/10/2014 in in IA No. 1/2014 in Crl.Appeal No. 835 of 2014
passed by the High Court Of Karnataka At Bangalore)
J JAYALALITHAA Petitioner(s)
VERSUS
STATE OF TAMIL NADU REP. BY THE SUPERINTENDENT
OF POLICE DV AND AC, CHENNAI Respondent(s)
(With office report)
WITH
SLP(Crl) No. 7906-7908/2014
(With Office Report)
Date : 17/10/2014 These petitions were called on
for hearing today.
CORAM :
HON’BLE THE CHIEF JUSTICE
HON’BLE MR. JUSTICE MADAN B. LOKUR
HON’BLE MR. JUSTICE A.K. SIKRI

For Petitioner(s) Mr. Fali S. Nariman, Sr. Adv.
Mr. B. Kumar, Sr. Adv.
Mr. A Navaneetha Krishnan, Sr. Adv.
Mr. S. Senthil, Adv.
Mr. Gaurav Agrawal,Adv.
Ms. Meha Aggarwal, Adv.
Mr. K.T.S. Tulsi, Sr. Adv.
Mr. C Mani Shankar, Adv.
Mr. Rupesh Kumar,Adv.
Mr. A. Ashokan,Adv.
Mr. Raj Kamal, Adv.
Mr. Farz Khan, AdV.
For Respondent(s)/ Mr. Subramonium Swamy,
Intervenor(s) In-person
Ms. Roxy Subramanian, Adv.
Mr. Yatinder Choudhary, Adv.
2
UPON hearing the counsel the Court made the following
O R D E R
After hearing Shri Fali S. Nariman,
Shri K.T.S. Tulsi, learned senior counsel
for the petitioners and Shri Subramonium
Swamy, party-in-person and also the
complainant, for the present, we suspend
the sentence and direct that the
petitioners, (i) Selvi J.Jayalalithaa, (ii)
Tmt.N.Sasikala, (iii) Mr.V.N. Sudhakaran,
and (iv) TMT. J.Elasvarasi be released on
bail on executing a bond with two solvent
sureties by each of them to the
satisfaction of the 36th Addl. City Civil &
Sessions Judge
(Spl. Court for Trial of
Criminal Cases against Kum. Jayalalitha &
Ors) at Bangalore.
Call these matters on 18th December,
2014.
[ Charanjeet Kaur ] [ Vinod K
ulvi ]
Court Master Asstt. Registrar

Bombay HC issues notice to RBI on ballooning NPAs


FEXpress Aamir Khan | Mumbai |  October 17, 2014 1:38 am
The Bombay High Court has issued notice to the Reserve Bank of India in connection with a PIL which alleges that the non-performing assets (NPA) of nationalised banks swelled up from Rs 455 crore for the year ended March 2008 to Rs 9,190 crore in March 2012.
However, according to the RBI annual report, gross NPAs for public sector banks for FY 14 stood at 4.7 per cent of gross advances, or approximately Rs 2.8 lakh crore.
Justices AS Oka and GS Kulkarni gave the direction while acting on a PIL filed by activist Ketan Tirodkar, seeking directions to the RBI to register a case with the CBI to probe into the “fraudulent sanctions” leading to such huge NPAs. Once the borrower has failed to make interest or principal payments for 90 days, the bank loan is considered to be a NPA.


Relying on RTI replies obtained from the RBI, Tirodkar told the HC that there were over 140 cases of fraud of around Rs 15 crore each reported to the CBI by various banks between the years 2008 and 2012. However, he alleged, there was no information about whether or not cases of NPAs were registered with the investigating agency.
Nationalised banks have not complied with the Banking Regulation Act, 1969, which mandates periodical submission of audit reports to the RBI, alleged the petitioner.
“The Act is not complied with in order to suppress the NPA scenario and shield the culprit beneficiaries working in collusion with the banking authorities,” the PIL alleged.
The involvement of bank authorities commences at the stage when a would-be defaulter approaches the bank to extract a loan against a flimsy proposal / asset with the intention to dupe the bank in future, said the PIL.
While stating the “modus operandi” of banking authorities, the petitioner said they act in connivance with the future defaulters, decorate artificially the feasibility report, to sanction the proposal.
“The NPAs start accumulating at the end of the quarter which goes unreported to the RBI for a long time. Subsequently, such huge volumes of NPA, when they finally get reported to the RBI, have passed the stage of correction, and the RBI and the banks are forced to either write them off completely or to settle them for peanuts,” Tirodkar claimed.
While issuing the notice, the HC has posted the hearing on December 9.

The bail hearing — as it happened in the Supreme Court

The Hindu NEW DELHI, October 18, 2014
The bail hearing — as it happened in the Supreme Court
10.30 a.m.:  The First Court of the country presided over by a Bench led by Chief Justice of India H.L. Dattu and Justices Madan B. Lokur and A.K. Sikri assembles for the day. The courtroom is jam-packed. Many lawyers from Tamil Nadu and AIADMK cadre present in the court and visitors’ gallery.
11.30 a.m.: Senior advocate Fali S. Nariman, for former Tamil Nadu Chief Minister Jayalalithaa, enters the courtroom in his quiet fashion. He is accompanied by senior advocate KTS Tulsi, who represents two of the accused.
11.40 a.m.: Item 65 on the board is called. Arguments commence with Mr. Nariman driving right into the Karnataka High Court’s bail order. He says the High Court judge has committed an error. Says the High Court refers to the 2012 case law - State of Maharashtra Through CBI, Anti Corruption Branch, Mumbai vs. Balakrishna Dattatrya Kumbhar - which deals with stay of conviction and not suspension of sentence.
11.42 a.m.: Mr. Nariman says using the 2012 case law to note that “corruption is a violation of human rights” in a limited question of suspension of sentence is wrong.
11.44 a.m.: Justice Dattu responds that the HC judge is merely saying that these are white-collar crimes. Mr. Nariman responds that a catena of Supreme Court decisions says “suspension of sentence when the criminal appeal is pending is a valuable right afforded to the accused, and is the norm.”
11.46 a.m.: Mr. Nariman picks up each judgment used by the Karnataka High Court to justify the refusal of suspension of sentence to counter that in all of them, the tenor of judicial reasoning is that suspension of sentence is the norm, and if denied will leave the exercise of criminal appeal “an exercise in futility” for the accused.
11.53 a.m.: Mr. Nariman argues that the Special Court convicted his client by “ ignoring a series of evidence on income and assessments placed before it to show that there is no case made out against her under the Prevention of Corruption Act.
12 noon: “But how many years did you take to complete the trial?” the Chief Justice interrupts Mr. Nariman.
“Far too many, My Lord,” Mr. Nariman concedes.
“If we pass the suspension of sentence now, you will take another two decades to finish the appeal,” Justice Dattu responds.
12.07 p.m.: Mr. Nariman says he will give an affidavit on behalf of his client that the appeal in the High Court will be completed in two months. There will be no delay on Ms. Jayalalithaa’s part.
“Should we not take into consideration that the conduct of the accused in the Special Court, in the High Court even in the Supreme Court... the case went on for years and years and years,” the CJI says.
12.09 p.m.: “This is a case in which the entire country has some considerations,” Mr. Nariman submits.
“We do not take all that into consideration. That does not matter for us,” the Chief Justice replies.
“I withdraw my comment,” Mr. Nariman pulls back.
12.10 p.m.: Mr. Nariman suggests to the Bench that “the lady can be confined to her house in Chennai for two months till the appeal is heard.” To this, the Chief Justice replies “we do not pass such unusual orders. Either we grant bail or not.” The Bench then goes into a huddle.
12.12 p.m.: Chief Justice Dattu asks within what time can Ms. Jayalalithaa file documents and be ready to fight her criminal appeal in the Karnataka High Court. Mr. Nariman replies “in six weeks.” He says the appeal hearing can be finished by February 2015. The Chief Justice says the court is willing to take his word for it and he does not have to file an affidavit. Mr. Tulsi submits he agrees with Mr. Nariman.
12.15 p.m.: Mr. Subramanian Swamy, the original complainant in the DA case, is given a chance to make his submissions. He says there has been sporadic violence in Tamil Nadu. Cartoons against the High Court judge have been put up.
He says the situation is “extraordinary” and that bail should not be granted. “She could have put a stop to the violence. One command from her was enough. But she has not. Her entire Cabinet is in Karnataka. Her Cabinet cannot take oath without crying,” Mr. Swamy submits.
Chief Justice Dattu turns to Mr. Nariman for an explanation. “All this will be communicated. I have already told them. A directive has to be indeed issued by her. They should maintain political morality,” Mr. Nariman assures the court.
12.20 p.m.: The Chief Justice tells Mr. Swamy: “An ‘extraordinary’ circumstance is when a person tries to run away to another country after conviction. Her party workers are unruly, what can she do? Is there anything to show that she ordered the violence?”
12.24 p.m.: “You prepare the paperbook [case documents and file] and keep it ready in two months. Then we will tell the High Court to hear the appeal in three months. But Mr. Nariman, if the paperbook is not ready in two months, we will not give you a day more,” the Chief Justice tells Mr. Nariman.
12.25 p.m.: A short order releasing the four accused on bail provided they present bond with solvent sureties to the satisfaction of the trial judge. The case to be listed on December 18.
“Keep the paperbook ready, Mr. Nariman on December 18. We will not give even one day’s extension [of bail],” the Chief Justice repeats amid the loud buzz of excitement from the crowd in the court.

Tuesday, October 14, 2014

Banks dig for information to check NPAs


TNN | Oct 6, 2014, 06.29AM IST


Forensic audit is becoming a standard feature for stressed loan accounts referred to the corporate debt restructuring cell - a forum where a consortium of banks decides on whether to restructure a loan. After a host of incidents involving fraud on the part of the borrower, lenders are no longer taking each other's word on the fidelity of the borrower. The worrying part is that, in many cases, there are indications that the borrower has not acted in good faith and restructuring of the loan is being turned down.

Forensic audit refers to picking up the money trail and coming out with information that can be used as legal evidence. In most of the high-profile default cases, banks have engaged a consultant to conduct a forensic audit. The most recent such case is that of Bhushan Steel, where banks have an exposure of around Rs 40,000 crore as against the company's market capitalization of Rs 2,600 crore.

Besides Bhushan Steel, a forensic audit has been undertaken in loan accounts of Winsome Diamonds and Kingfisher Airlines. The Reserve Bank of India, too, has engaged forensic auditors in the case of Deccan Chronicle. The banking regulator had also asked banks to use this for investigations into the money laundering allegations made following sting operations by a web portal.


audit
Forensic audit refers to picking up the money trail and coming out
with information that can be used as legal evidence.

Speaking to TOI, Arpinder Singh, partner and national leader, fraud investigation & dispute services, Ernst & Young, said, "Earlier, getting approval for corporate debt restructuring was a lot easier. Companies would depend on middle-men who would come up with a very fancy presentation. Today, 'managing' the consortium is becoming difficult for borrowers as forensic audit is becoming mandatory in restructuring."

According to a retired bank chairman, one of the reasons why banks insist on a forensic audit is to have their decision backed by an independent recommendation. This way, they are not blamed if the restructured account fails to recover.

Singh adds that close to half of the restructuring cases put up to the corporate debt restructuring forum audited by E&Y are being rejected. According to him, unlike in the earlier decade when the high level of bad loans was backed by real assets, there is an increase in the number of cases which are - on the face of it - fraudulent.

"Take the case of Winsome Diamonds where Rs 6,000 crore of diamonds are claimed to be sold to buyers in the Middle East, who go bankrupt and there is nothing left," said Singh. He added that many of the companies that are defaulting are turning out to be paper companies.


Book Review : Fali S. Nariman, ‘Before Memory Fades: An Autobiography’


Fali S. Nariman, ‘Before Memory Fades: An Autobiography’, 2010, Hay House (Rs. 599/-)

Surajit Bhaduri reviews ‘Before Memory Fades: An Autobiography’ which gives a wonderful insight into the life of Fali S. Nariman who is one of the greatest jurists that India has ever produced.

Born on the tenth day of 1929, at the General Hospital in faraway Rangoon, to a Zoroastrian, or (Parsis) family as they are called, Fali Sam Nariman, ‘Baba’ to his parents, had to leave for India and take refuge when the Japanese bombed Rangoon in December 1941, during the Second World War.

 Little did they know that their son would rise to become one of India’s greatest lawyers’. Fali was sent to Bishop Cotton School Shimla, then to St. Xavier’s College Bombay for his BA (Hons) and finally to Government Law College Bombay for his LLB.

 Nariman started his career at Payne & Co. as a trainee and thereafter joined the prestigious Kanga Chamber which apart from Sir Jamshedji B. Kanga boasted luminaries such as Harilal Kania the first Chief Justice of independent India and eminent lawyers such as Nani Palkhiwala, H. M. Seervai and Soli J. Sorabjee to name a few.

 It was Sir Jamshedji who helped Fali understand that “the art of advocacy - is to make simple what is complicated and vice versa”.

Fali still recalls of those early days in the Bar when he would occasionally get a brief in the form of “Brief for Consent Decree” on which he would mark the magnificent fee of one gold mohurs, though the customary fee was two gold mohurs.

 For juniors like him a consent decree brief would take at least three appearances in order to convince the judge.

 In another occasion when Fali was just a year old in the bar, Nani Palkhiwala had entrusted him with an appeal under the Bombay Land Requisition Act. Nani had an engagement before the Income Tax Appellate Tribunal, the matter reached the court, before Chief Justice Chagla and Justice Gajendragadkar. Fali told the bench that Mr Palkhiwala was appearing in another matter before the ITAT and would be coming in sometime. 

Then Chief Justice Chagla asked Fali if he knew the matter. This turned out to be a golden opportunity for Fali to prove himself and he read the facts and the legal provisions. 

While he could see the solicitors and clients who were sitting behind him wringing their hand in despair, Nani arrived before the court just when the judgement had been delivered. 

Nani interrupted but Chagla who never liked interruptions when he was dictating judgments, said “I don’t think, Mr. Palkhiwala, you can add anything more to what Mr. Nariman has so well presented”.

 These were some of the early memories in the Bombay Bar which Mr Nariman still recalls and cherish.

Before Memory Fades is not just a book but a classic piece of art if I may call. It is a commentary on the most important court cases like Shankari Prasad (1951), Sajjan Singh (1965), Golaknath (1967), Keshavananda Bharti (1973), and Minerva Mills (1980) which laid the fundamental basis of the Indian Constitution. Nariman explains how the judiciary dealt with these amendments and held that Fundamental Rights form a part of the 'basic structure' of the Constitution which can never be amended.

 Nariman recalls some of the most touching family sentiments, when he was offered High Court Judgeship at the age of 38 but declined the honour for financial reasons.

 Thereafter his daughter Anaheeta told Bapsi (Nariman’s wife) “Mummy, please tell daddy to accept; I promise I will not spend too much money, and will cut down on chocolates and sweets because I would like him to be a judge”.

 Years later, Anaheeta presented Fali a cartoon picture which reminds Nariman of “The Judge You Might Have Been”.

This autobiography gives a detailed insight of the National Emergency in 1975, when he was the Additional Solicitor General of India. Fali recalls of those days like 12th June 1975 when Justice Jagmohan Lal Sinha of the Allahabad High Court pronounced the judgment in the election petition filed against Indira Gandhi by Raj Narain where she was held guilty of corrupt practice and thus was disqualified from holding any public office.

 On 22nd June 1975 an appeal for stay to the Allahabad High Court judgment was filed before the vacation bench before Justice V. R. Krishna Iyer. Nani Palkhiwala argued and got the judgment reserved, but on 24th June 1975 a conditional stay order was granted. Fali S. Nariman recounts his own defiance against autocratic rule when he resigned from the post of Additional Solicitor General of India in opposition to the declaration of Internal Emergency in 1975 by the Indira Gandhi government, being the only public officer in the country to have registered his protest against the suppression of civil liberties.

Nariman acknowledges the contribution of a brave Judge Justice H.R. Khanna, (the then second senior most Judge) in the case of ADM Jabalpur (1976). “Khanna knew, when he signed the decenting judgment, that he was signing away his future chief justiceship”. Justice Khanna resigned “in a blaze of glory” when justice Beg superseded him. That’s the reason still today Justice H.R. Khanna’s portrait hangs in the Court where he sat (Court No 2. Supreme Court) says Nariman. While reading Nariman's book, one can sense that that the book is not only an autobiography but describes India’s political and constitutional history.

Nariman the lead counsel for the Union Carbide Corporation received severe criticisms while representing the company. Tribune des Droits Humains described him as a 'Fallen Angel', questioning his reputation as a human rights activist. In this autobiography Nariman has reproduced the letter that he wrote in response to the published article in which he defends himself by stating that the suggestion that lawyers who are human rights activists should not accept briefs of those who “violate the human rights of others', is impractical and fraught with grave consequences as it puts an almost impossible burden on the lawyer of pre-judging guilt; and (more important) it precludes the person charged with infringing the human rights of another (such as one accused of murder) the right to be defended by a 'lawyer of his choice” - in my country, a guaranteed constitutional right.”

Nariman also remembers those days when he was the standing counsel in the Supreme Court for the state of Gujarat in a PIL filed on behalf of the tribals who were displaced by the rising height of the Narmada Dam in Gujarat. 

When Nariman went through press reports where Christians in certain part of Gujarat were been harassed and their Bibles being burnt, he asked the then Chief Minister of Gujarat Mr. Keshubhai Patel to stop these acts of grave injustice. Inspite of the assurance given by the Chief Minister the situation worsened, now not only Bibles but Churches in various part of Gujarat was destroyed. In December 1998 Nariman returned the brief and said that “I would not appear for the state of Gujarat in this or any other matter”. Like Palkiwala, during Emergency of 1975, he too never compromised with his principals.

In one of the most important cases (Second Judges Case) decided by the Supreme Court Nariman appeared and won, “A Case I Won – But I Would Prefer To Have Lost”. 

Criticizing his own win, Nariman said “I don’t see what is so special about the first five judges of the Supreme Court. They are only the first five in seniority of appointment – not necessarily in superiority of wisdom or competence. I see no reason why all the judges in the highest court should not be consulted when a proposal is made for appointment of a high court judge (or an eminent advocate) to be a judge of the Supreme Court. I would suggest that the closed-circuit network of five judges should be disbanded.

Before Memory Fades is much more than a chronological account of an eminent lawyer and humble person’s successful life. It is the work of a storyteller whose observations about places, people, and circumstances add up to provide a unique insight into the legal profession, from the early years of Independence when a young Fali joined the Bombay Bar and did “more watching than pleading.” 

It is a classic example of an extraordinary life lived so ordinarily and is much more than just a collection of anecdotes and reflections on the events and people that have filled his life. This book is a must read for all who have admires the living legend Mr. Fali Sam Nariman who was awarded the Padma Bhushan (1991) and Padma Vibhushan (2007), by the President of India in recognition of distinguished service in the field of jurisprudence and public affairs.

 This autobiography not only inspires us but also reminds us of how important a role a lawyer can play in the moulding of our country.

 Finally Nariman ends by thanking the secular India “I have lived and flourished in a secular India. In the fullness of time if God wills, I would also like to die in a secular India”.


SURAJIT BHADURI  B.A. LL.B (Hons) from Gujarat National Law University, Gandhinagar and has written this review for India Law Journal. He can be reached at mailsurajitbhaduri@gmail.com.

SEBI bars DLF, KP Singh & five top executives from entering securities markets for 3 years

SEBI bars DLF, KP Singh & five top executives from entering securities markets for 3 yearsSEBI bars DLF, KP Singh & five top executives from entering securities markets for 3 years

ET Bureau | 14 Oct, 2014, 04.00AM IST 

t  India's largest builder DLF, which has been in the centre of a political storm for its alleged dealings with Robert Vadra, has now received a body blow from the capital market watchdog Sebi. DLF, its Chairman KP Singh, some members of the promoter family and a few senior executives have been barred from dealing in stocks and securities for three years by Sebi.

The regulatory action stems from the DLFmanagement's failure to disclose material information to investors during the firm's maiden equity offer in 2007. The Sebi order dated October 10 was uploaded on the regulator's website well after trading hours on Monday when realty stocks such as DLF and Unitech fell 4% while others like Sobha Developers, Godrej Properties and Phoenix Mills rose. Option traders who may have had a whiff of the bad news took positions during the day. Singh's son Rajiv — vice-chairman of the real estate company — and daughter Pia — a whole-time director in the firm — are among those barred from accessing the securities market.

DLF is likely to challenge the order before the Securities Appellate Tribunal, a quasi judicial body.

The controversy that culminated in the final Sebi order was sparked just before DLF launched its IPO.

A few days before the Rs 9,187.5-crore IPO opened in 2007, Sebi had received complaints from one Kimsuk Krishna Sinha, who alleged that DLF group entity Sudipti Estates and other persons had duped him of Rs 34 crore in a land deal.

The complainant, Kimsuk Krishna Sinha, had pointed out that Sudipti had only two shareholders — DLF Home Developers and DLF Estate Developers — which were wholly owned subsidiaries of DLF. The DLF management had then denied that Sudipti was part of the group. Sinha subsequently filed a writ petition before the Delhi High Court, which then directed Sebi to examine the matter. At the high court's direction, Sebi issued show-cause notices (SCN) to DLF and its seven senior officials. The regulator alleged the company and the officials concerned had used a complex corporate structure to disassociate Sudipti from DLF.

Thus, Sudipti did not figure in the IPO prospectus of DLF. "The Noticees actively and knowingly suppressed several material information and facts in the red herring prospectus (RHP)/prospectus leading to misstatements in the RHP/prospectus so as to mislead and defraud the investors in securities market in connection with the issue of shares of DLF," said the Sebi order, which includes the response of DLF and its directors.

In a statement late Monday evening, DLF denied any wrong-doing and said its actions were guided by advice from lawyers and merchant bankers.



"DLF and its board wish to reassure its investors and all other stakeholders that it has not acted in contravention of law either during its initial public offer or otherwise. DLF and its board were guided by and acted on the advice of eminent legal advisors, merchant bankers and audit firms while formulating its offer documents. DLF will defend itself to the fullest extent against any adverse findings and measures contained in the order passed by Sebi. DLF has full faith in the judicial process and is confident of vindication of its stand in the near future."

In his response to Sebi, which is quoted in the order, KP Singh said the show-cause notice was issued to him in his capacity as DLF chairman and there was no allegation of any wrong-doing on his part. Also, he said, there was no concept of strict or vicarious liability under Section 11 of the Sebi Act which would enable the regulator to issue directions against directors in the absence of any specific allegations against them.

Singh's legal representative also submitted that given the complexity and specialised nature of the IPO process and his advanced age of 82 years, Singh relied on the advice of various experts involved in the process such as merchant bankers, and acted in a bona fide manner on such expert advice. Leading investment banks such as DSP Merrill Lynch, Kotak, Citi, Lehman, Deutsche Equities, ICICI Securities, UBS and SBI Capital Markets were associated with the IPO.

"It's an excellent order clearly establishing the fact that in the eyes of law, no one is big or small," said JN Gupta, founder & MD, Stakeholders Empowerment Services. In its order, Sebi said DLF continued to be in control of the board of directors of Sudipti and related entities such as Shalika and Felicite, which remained its subsidiaries even after the purported transfer of shareholding in them on November 29-30, 2006. Thus, according to Sebi, the three companies were related parties and DLF had failed to disclose its related party transactions.

"Sebi has sent the right message to those who think they (can) get (away) by violating regulations and suppressing information," said Huzefa Nasikwala of Nasikwala Law Office. "I would like to see more stringent action from the market regulator in coming days." Sebi's whole-time member Rajeev Kumar Agarwal, who signed the order, said, "I, therefore, find that the purported transfers of shareholding in the said three companies were sham transactions devised as aplan, scheme, design and device to camouflage the association of DLF with these three companies as holding-subsidiary."

Sec 13 (4) and Sec 14 :SC :Standard Chartered Bank Vs V. Noble Kumar & Others

 


IN THE SUPREME COURT OF INDIA


                       CRIMINAL APPELLATE JURISDICTION


                    CRIMINAL APPEAL NO.  1218     OF 2013
     (Arising out of Special Leave Petition (Criminal) No.2038 of 2011)
Standard Chartered Bank                      ...Appellant
            Versus
V. Noble Kumar & Others                      ...Respondents


                                    WITH

                   CRIMINAL APPEAL NO.  1217       OF 2013
     (Arising out of Special Leave Petition (Criminal) No.6560 of 2011)
Senior Manager, State Bank of India
& Another                                       ...Appellants
            Versus
R. Shiva Subramaniyan & Another              ...Respondents




                               J U D G M E N T


Chelameswar, J.

1.    Leave granted.


2.    Since both the appeals raise a common question of law,  the  same  are
being disposed of by this common judgment.  For the sake of convenience,  we
shall refer to the facts in Criminal Appeal arising  out  of  Special  Leave
Petition (Criminal) No.2038 of 2011.

3.    This appeal arises out of judgment and order  of  the  High  Court  of
Judicature at Madras in Writ Petition No.4600 of 2010  dated  23rd  January,
2003.

4.     The  first  respondent  is  a  guarantor  of  the  borrower  to  loan
transaction whereby the second respondent borrowed money from the  appellant
herein. 

 The undisputed facts  are  that  the  first  respondent  created  a
mortgage on certain property  (Land  and  building  comprised  in  Re-survey
No.493/2 lying within the sub-registration district of Saidapet  hereinafter
referred  to  as  the  "secured  asset")  owned  by  him   to   secure   the
abovementioned loan.[1]

5.    On 15.11.2007, a notice under section 13(2)[2] of  the  Securitisation
and Reconstruction of Financial Assets and Enforcement of Security  Interest
Act, 2002 (hereinafter referred to as  "the  SARFAESI  Act")  demanding  the
repayment of the loan amount along with interest within a  period  of  sixty
days was issued inter  alia  to  the  borrower  as  well  as  the  guarantor
(respondent  nos.2  and  1  herein).   The  said  notice  also  advised  the
respondents to comply with the demand  in  order  to  avoid  further  action
under the Act.  The first respondent neither made  the  payment  nor  raised
any objection to the said demand.

6.    Consequent upon the failure of the respondents to  make  the  payments
the appellant  herein  made  an  application  under  section  14[3]  of  the
SARFAESI Act  in  the  Court  of  Chief  Judicial  Magistrate,  Chengalpattu
requesting him to take possession of the secured asset and to  handover  the
same to the appellant.

7.     Pursuant  to  the  abovementioned  application,  the  Chief  Judicial
Magistrate, Chengalpattu by his proceeding  dated  14.12.2009  appointed  an
Advocate commissioner to  take  possession  of  the  secured  asset  and  to
handover the same to the appellant herein.

8.    Challenging the legality  of  the  proceedings  dated  14.12.2009  the
first respondent approached the High Court. By the  judgment  under  appeal,
the first respondent's writ petition came to be allowed by a Division  Bench
setting aside the order impugned therein.

9.    The High Court recorded the submissions made before it as follows:
      "3.   The learned counsel appearing  for  the  petitioner  raised  two
      contentions, viz.:


        i) The bank cannot bypass section 13(4) of  the  SARFAESI  Act  and
           invoke the provisions of section 14.  He  would  submit,  before
           invoking  section  14,  that  notice  under  section  13(4)   is
           necessary, otherwise the provisions of appeal under  section  17
           will become illusory, particularly when  the  proceedings  under
           section 14 cannot be questioned  by  filing  appeal  before  the
           Tribunal or before a Court.


       ii) In the event the procedures contemplated under  Rule  8  of  the
           Security Interest (Enforcement) Rules, 2002,  are  not  followed
           before section 14 is invoked, the  order  passed  by  the  Chief
           Judicial Magistrate would be contrary  to  the  said  Rules  and
           consequently, the order passed under section 14 is liable to  be
           set aside."

10.   It is argued before the High  Court  as  well  as  before  us  by  the
respondent that a secured creditor before  invoking  the  authority  of  the
Magistrate under section  14  must  necessarily  make  an  attempt  to  take
possession of the secured asset.

 Only when the creditor faces resistance  to
such an attempt the creditor could resort to the procedure under section  14
of the Act.  According to the first respondent, section  17[4]  of  the  Act
provides an "appeal" only against the measures taken by the  creditor  under
section 13(4)[5] of the Act and no  such  appeal  is  available  against  an
action taken by the  Judicial  Magistrate  under  section  14  of  the  Act.
Therefore, permitting the  creditor  to  invoke  section  14  without  first
resorting to the procedure under section 13(4) would deprive  the  owner  of
the secured  asset  an  opportunity  to  prefer  an  "appeal"  to  have  his
grievances adjudicated.  It is further argued that Rule 8  of  the  Security
Interest (Enforcement) Rules, 2002 (hereinafter referred to as "the  Rules")
contemplates a procedure to be followed which includes  a  certain  mode  of
publicity of taking possession to be made, and therefore, even a  Magistrate
exercising power under section 14 of the Act is also required to follow  the
procedure contemplated under Rule 8 though the Rule does not  expressly  say
so.  Failure to comply with the requirement of Rule 8 in  the  instant  case
vitiated the order of the Magistrate.

11.   The abovementioned submissions found favour with the High Court.

12.   The learned counsel appearing for the appellant argued before us  that
the Act provided for two alternative procedures  for  taking  possession  of
the secured assets under sections 13(4) and 14 respectively

While  section
13(4) authorises the creditor himself to  take  possession  of  the  secured
assets without the aid of the State's coercive  power,  section  14  enables
the secured creditor to seek the assistance of the  State's  coercive  power
for securing the possession of the secured assets. 

 It is submitted that  it
is always open to the secured creditor to choose one of  the  abovementioned
two procedures in a given case to obtain possession  of  the  secured  asset
depending  upon  his  own  assessment  of  the   situation   regarding   the
possibility of resistance (by the debtor or guarantor as the  case  may  be)
for taking possession of the secured assets.  It is also submitted that  the
fact that an "appeal" under section 17 is  available  against  the  measures
taken under section 13(4) and such an "appeal" is not available against  the
measures taken by the Magistrate under section 14 does not necessarily  mean
that the procedure under section 14 cannot  be  resorted  to  without  first
exhausting the measures contemplated under section  13(4).   Lastly,  it  is
submitted on behalf of the appellant that the High  Court  completely  erred
in recording a conclusion:
      "3.   In the event the secured creditor  bypassing  the  provision  of
      section 13(4) and the rule 8 and files an  application  under  section
      14, a situation may arise that the advocate commissioner may  straight
      away take possession without there being  compliance  of  any  of  the
      provisions of section 13(4) or rule 8.  When both the  provisions  are
      read  together,  we  could  only  come  to  the  conclusion  that  the
      legislature  had  not  intended  to  create  such  a  situation.   The
      objection of section 14 is only to be  invoked  in  case  the  secured
      creditor faces  obstruction  and  not  as  a  routine,  bypassing  the
      provisions of section 13(4).



13.   On the other  hand,  the  learned  counsel  appearing  for  the  first
respondent reiterated the submissions made by him before the High Court.

14.   To decide  the  correctness  of  the  judgment  under  appeal,  it  is
essential that we examine the purpose and the scheme of the  Act.    One  of
the professed purposes sought to be achieved by the enactment  as  evidenced
by the Objects and Reasons appended to the Bill is as follows:-
        "....Further, unlike international banks, the banks  and  financial
        institutions in India do not  have  power  to  take  possession  of
        securities and sell them.  Our existing legal framework relating to
        commercial  transactions  has  not  kept  pace  with  the  changing
        commercial practices  and  financial  sector  reforms.    This  has
        resulted in slow place of recovery of defaulting loans and mounting
        levels  of   non-performing   assets   of   banks   and   financial
        institutions."

15.   In order to achieve the said purpose,  sections  13,  14  and  15  are
enacted.  Only sections 13 and 14  are  relevant  for  the  present  appeal.
Section  13(1)[6]  enables  the  secured  creditor  to  enforce  a  security
interest which such creditor has in a secured asset without intervention  of
the Court or Tribunal.  The expression "security interest" is defined  under
section 2 (zf) as follows:-
        "security interest" means right, title and  interest  of  any  kind
        whatsoever upon property, created in favour of any secured creditor
        and includes any mortgage, charge, hypothecation, assignment  other
        than those specified in section 31;



16.   Sub-section (2) authorises the secured creditor  to  exercise  any  of
the rights under sub-section (4).  Sub-section (2) reads as follows:-
        (2) Where any borrower, who is  under  a  liability  to  a  secured
        creditor  under  a  security  agreement,   makes  any  default   in
        repayment of secured  debt  or  any  instalment  thereof,  and  his
        account in respect of such   debt  is  classified  by  the  secured
        creditor as non-performing asset, then, the  secured  creditor  may
        require the  borrower by notice in writing to discharge in full his
        liabilities to the secured creditor  within  sixty  days  from  the
        date of notice failing which the secured creditor shall be entitled
        to exercise all or any of the rights under subsection (4).



18.   It can be  seen  from  the  said  sub-section  that  for  the  secured
creditor to take possession of the secured assets, the following  conditions
must be satisfied:  (i) That there must be  a  security  agreement[7]  which
creates the liability of the borrower  to  make  repayment  to  the  secured
creditor of the secured debt, (ii)  The  secured  creditor  is  required  to
demand the borrower by notice in writing to  discharge  the  full  liability
within a period of 60 days from the date of the notice.

19.   Sub-section (3)[8] stipulate that such notice shall give  the  details
of (i) the amount payable by the borrower (ii) the interest in  the  secured
asset intended to be enforced by the secured creditor.   Sub-section  (4)[9]
provides for various measures which  can  be  resorted  to  by  the  secured
creditor in order to recover  his  debt.    Such  measures  are  (1)  taking
possession of the secured asset or (2) taking over  the  management  of  the
business of the borrower.[10]   The  secured  creditor  is  also  given  the
right either to make a further assignment of his interest or lease  out  the
secured assets or sell the same in order to realise his  debt.   Such  right
of the secured creditor is hedged with  limitations/safeguards  designed  to
protect interest of the borrower so that the secured creditor may not  abuse
his rights i.e. except to take a possession of  the  property  and  alienate
the same only to the extent necessary to realise the actual  amount  due  to
him. Details of which may not be necessary for the  purpose  of  this  case.
We are only concerned in this case with  the  method  and  manner  in  which
possession of the secured  assets  could  be  obtained  and  the  conditions
precedents that are required to be satisfied for taking  possession  of  the
secured assets.

20.   Section 13, as originally enacted, did not contain any  provision  for
consideration of objections (if any) the borrower may  have  to  the  demand
made under  sub-section  (2).    However,  this  Court  in  Mardia  Chemials
Limited v. Union of India [(2004) 4 SCC 311],  where  the  constitutionality
of the Act fell for the consideration of this Court,  noticed  that  section
13(2) is a very stringent provision and opined:-

        "77. It is also true that till the stage of making  of  the  demand
        and notice under Section 13(2)  of  the  Act,  no  hearing  can  be
        claimed for by the borrower. But looking to the stringent nature of
        measures to be taken without intervention of court with  a  bar  to
        approach the court or any other forum at  that  stage,  it  becomes
        only reasonable that the secured creditor must bear in mind the say
        of the borrower before such a process of recovery is  initiated  so
        as to demonstrate that the reply of  the  borrower  to  the  notice
        under Section 13(2) of the Act has been considered applying mind to
        it. The reasons, howsoever brief they may be, for not accepting the
        objections, if raised in the reply, must  be  communicated  to  the
        borrower.  True,  presumption  is  in  favour  of  validity  of  an
        enactment and a legislation may not  be  declared  unconstitutional
        lightly more so, in the matters relating  to  fiscal  and  economic
        policies resorted to in the public interest, but while resorting to
        such legislation it would be necessary  to  see  that  the  persons
        aggrieved get a fair deal at the  hands  of  those  who  have  been
        vested with the powers to enforce drastic steps to make recovery."


21.   Consequent upon the said decision, Parliament  introduced  sub-section
3A[11] by Act 30 of 2004,  which  now  provides  for  consideration  of  the
objections, if any raised by the  borrower.   By  definition  under  section
2(f) of the Act a borrower includes the guarantor of the debt.

22.   Section 3A further provides that if the  secured  creditor  reaches  a
conclusion that the objections raised by the borrower are not acceptable  or
tenable, the creditor shall communicate the reasons  for  non-acceptance  of
the objections within a period of 15 days.   The proviso to  the  said  sub-
section declares that the rejection of the objections does  not  confer  any
right on the borrower to resort  to  the  proceedings,  contemplated  either
under section 17 or 17A.   

We may indicate here both  sections  17  and  17A
afford an opportunity  to  the  borrower  to  approach  the  Debts  Recovery
Tribunal or (in the cases of Jammu & Kashmir) the concerned  District  Court
against any measure taken under section 13(4).

23.   In every  case  where  the  objections  raised  by  the  borrower  are
rejected by the secured creditor, the secured creditor is entitled  to  take
possession of the secured assets.   In our opinion,  such  action  -  having
regard to the object and scheme of the Act - could be taken directly by  the
secured creditor.  However, visualising the possibility  of  resistance  for
such action, Parliament under section  14  also  provided  for  seeking  the
assistance of the judicial power of the State for  obtaining  possession  of
the secured asset, in those cases where the secured creditor seeks it.

24.   Under the scheme of section 14, a  secured  creditor  who  desires  to
seek the assistance of the State's coercive power for  obtaining  possession
of the secured asset is required to make a request in writing to  the  Chief
Metropolitan Magistrate or District Magistrate  within  whose  jurisdiction,
secured asset is located praying that the secured asset and other  documents
relating thereto may be taken possession thereof.  The language  of  section
14  originally  enacted  purportedly  obliged  the  Magistrate  receiving  a
request under section 14  to  take  possession  of  the  secured  asset  and
documents, if any, related thereto in terms of the request received  by  him
without any further scrutiny of the matter.

25.   However, the Bombay High Court in the case of  Trade  Well  v.  Indian
Bank [2007 CriLJ 2544] opined;
        "2 ...CMM/DM acting under Section 14 of the NPA Act is not required
        to give notice either to the borrower or to the 3rd party.


        3. He has to only verify from the  bank  or  financial  institution
        whether notice under Section 13(2) of the NPA Act is given  or  not
        and whether  the  secured  assets  fall  within  his  jurisdiction.
        There is no adjudication of any kind at this stage.


        4. It is only if the above conditions are not  fulfilled  that  the
        CMM/DM can refuse to pass an order under Section 14 of the NPA  act
        by recording that the above  conditions  are  not  fulfilled.    If
        these two conditions are fulfilled, he cannot  refuse  to  pass  an
        order under Section 14."


The said judgment was followed by the Madras  High  Court  in  the  case  of
Indian Overseas Bank v. M/s. Sri Aravindh  Steels Ltd. [AIR 2009  Mad.  10].
 Subsequently, Parliament inserted a proviso to section 14(1)[12]  and  also
sub-section 1A[13] by Act 1 of 2013.


26.   We must make it clear that these provisions were not in  existence  on
the  date  of  the  order  impugned  in  the  instant  proceedings.    These
amendments are made to provide  safeguards  to  the  interest  of  borrower.
These provisions stipulate that  a  secured  creditor  who  is  seeking  the
intervention of the Magistrate under section  14  is  required  to  file  an
affidavit furnishing the information contemplated under various  sub-clauses
(i) to (ix) of the proviso and obligates the  Magistrate  to  pass  suitable
orders regarding taking of the possession of the secured assets  only  after
being satisfied with the contents of the affidavits.

27.   An analysis of the 9 sub-clauses of the proviso which  deal  with  the
information that is required to be furnished in the affidavit filed  by  the
secured  creditor  indicates  in  substance  that  (i)  there  was  a   loan
transaction under which a borrower is liable to repay the loan  amount  with
interest, (ii) there is a security  interest  created  in  a  secured  asset
belonging to the borrower, (iii) that the borrower committed default in  the
repayment, (iv) that a notice contemplated under section 13(2) was  in  fact
issued, (v) in spite of such  a  notice,  the  borrower  did  not  make  the
repayment, (vi) the objections of the borrower had in fact  been  considered
and rejected, (vii) the reasons for such rejection had been communicated  to
the borrower etc.


28.   The satisfaction of  the  Magistrate  contemplated  under  the  second
proviso to section 14(1) necessarily requires the Magistrate to examine  the
factual correctness of the assertions made in such an affidavit but not  the
legal niceties of the transaction.   It  is  only  after  recording  of  his
satisfaction the Magistrate can pass appropriate orders regarding taking  of
possession of the secured asset.


29.   It is  in  the  above-mentioned  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.


30.   The "appeal"  under  section  17[14]  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  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.

31.   It can be noticed from the language of the proviso to  section  13(3A)
and the language of  section  17  that  an  "appeal"  under  section  17  is
available to the borrower  only  after  losing  possession  of  the  secured
asset. The employment of the  words  "aggrieved  by....................taken
by the secured creditor" in  section  17(1)  clearly  indicates  the  appeal
under section 17 is available to the borrower only after  losing  possession
of the property.  To set at naught any doubt  regarding  the  interpretation
of section 17, the proviso[16] to sub-section (3A) of section  13  makes  it
explicitly clear that either the reasons  indicated  for  rejection  of  the
objections of the borrower or the likely  action  of  the  secured  creditor
shall not confer any right under section 17.


32.   The same principle is re-emphasised with the newly  added  explanation
in section 17(1) which came to be inserted by Act No.30 of 2004:
      "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 sub-section 1 of section 17."


33.   The High Court  opined  that  Rule  8[17]  of  the  Security  Interest
(Enforcement) Rules, 2002 provides for certain (i) procedure to be  followed
by the secured creditor taking possession of the secured  asset.   The  High
Court opined that even in a case where procedure contemplated under  section
14  is  resorted  to  for  obtaining  possession  of  the  secured   assets,
compliance with Rule 8 is mandatory.  Such a requirement  according  to  the
High Court arises because in view of the High Court:
       "The object of Section 14 is only to be invoked in case the  secured
       creditor faces obstruction  and  not  as  a  routine  bypassing  the
       provisions of Section 13(4)."


Under Rule 8, the secured creditor is required to deliver to the borrower  a
notice prepared as nearly as possible in Appendix IV to  the  Rules  and  by
affixing such notice to the property.  Further sub-rule (2)  which  came  to
be substituted in 2007 in original provides  that  the  notice  contemplated
under sub-rule (1) is required to be published  in  two  leading  newspapers
having sufficient circulation in the locality of which at least  one  should
be in vernacular language.  

Prior to 2007 the requirement of publication  in
vernacular newspaper was not there.


34.   The High Court recognized  that  the  language  of  Rule  8  does  not
expressly warrant the compliance with  the  procedure  contemplated  therein
when section 14 is resorted to  for  obtaining  possession  of  the  secured
asset:
      "In the absence of the rule, the strict compliance of  the  provisions
      of section 13(4) and rule 8, even  in  case  of  possession  taken  by
      virtue of an order under section 14, assumes importance."


35.   We are of the opinion that the High Court clearly erred  in  recording
such a  conclusion.  

 The  language  of  Rule  8  does  not  demand  such  a
construction.   On  the  other  hand,  a  Magistrate  whose  functioning  is
structured by  the  Code  of  Criminal  Procedure  is  required  to  act  in
accordance with the provisions of the said code  unless  expressly  ordained
otherwise by any other law.  It is not a case that Cr.P.C. never  prescribed
for the procedure to be followed by the  Magistrate  in  a  case  where  the
Magistrate is required to take possession of property.  For  example,  under
section 83 of the Code,  a  criminal  Court  is  authorized  to  attach  the
movable or immovable property or both belonging to  a  proclaimed  offender.
Sub-sections (3) and (4) to section 83[18] specifically  provide  that  once
an order of attachment under sub-section (1) is made by the criminal  Court,
the property which is the subject matter of such attachment shall either  be
seized or taken possession of as the case may be  depending  upon  the  fact
whether  the  property  is  movable  or  immovable.  Both  the  sub-sections
contemplate the appointment of receiver.  It is declared  under  sub-section
(6) that the powers, duties and liabilities of a  receiver  appointed  under
section 83 are the same as those of a receiver appointed under the  Code  of
Civil Procedure, 1908.  Order XL of the Code of Civil Procedure  deals  with
the appointment of the receiver. Rule 1 authorizes the Court  to  appoint  a
receiver:
      "1.   Appointment of Receivers.-(1) Where it appears to the  Court  to
      be just and convenient, the Court may by order-


        a) appoint a receiver of any  property,  whether  before  or  after
           decree;


        b) remove  any  person  from  the  possession  or  custody  of  the
           property;

        c) commit the same to the possession, custody or management of  the
           receiver, and

        d) confer upon the receiver all such powers,  as  to  bringing  and
           defending suits and for the realisation, management, protection,
           preservation and improvement of the property, the collection  of
           the rents and profits thereof, the application and  disposal  of
           such rents and profits, and the execution of  documents  as  the
           owner himself has, or such of those powers as the  Court  thinks
           fit.

      (2)   Nothing in this rule shall authorise the Court  to  remove  from
      the possession or custody of property any person whom any party to the
      suit has not a present right so to remove."


It can also be noticed from Rule (1) that the power of the  Civil  Court  to
appoint a receiver could be exercised either before or after passing of  the
decree.

36.   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.

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


      (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.


      (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.

38.   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.

39.   In this connection, it is material to refer to the judgment in  Mardia
Chemicals (supra) wherein the Court was  concerned  with  the  legality  and
validity of the SARFAESI Act.  The Court held the Act  to  be  valid  except
Section 17(2) thereof as it then stood. In paragraphs 59, 62 and 76  of  the
judgment the Court in terms held that in remedy under Section 17 of the  Act
was essentially like filing a suit in a Civil Court though it was called  an
Appeal.  It is also relevant to note that in  the  ultimate  conclusions  in
paragraph 80 of the judgment this  Court  held  in  sub-para  2  thereof  as
follows:-
      "2.   As already discussed earlier,  on  measures  having  been  taken
      under  sub-section  (4)  of  Section  13  and  before  the   date   of
      sale/auction of the property it would be open for the borrower to file
      an appeal (petition) under Section 17 of  the  Act  before  the  Debts
      Recovery Tribunal."




      The grievance of the respondent that it will be left  with  no  remedy
is, therefore, misplaced.  As held by a bench  of  three  Judges  in  Mardia
Chemicals (supra), it would be open to the borrower to file an appeal  under
Section 17 any time after the measures are taken under Section  13  (4)  and
before the date of sale/auction of the property.  The same  would  apply  if
the secured creditor resorts to Section  14  and  takes  possession  of  the
property with the help of the officer appointed by the Magistrate.

40.   Coming to the facts of this case, a notice under section 13(2) was  in
fact served on the respondent for which the respondent  did  not  choose  to
respond.  Therefore, there was no occasion for  the  appellant  to  consider
the objections as there was none of the respondent against the  demand  made
in the said notice.  It is brought to our  notice  that  even  while  making
application under section 14 the appellant filed an affidavit  substantially
providing  for  the  necessary  information  contemplated  under  the  newly
introduced proviso to section 14 (1).  We have already  noticed  that  there
was no statutory requirement as on  the  date  when  the  application  under
section 14 was made in the instant case either to give such an affidavit  or
regarding the content of the affidavit.  Nonetheless the appellant chose  to
give such an affidavit.   A copy of which is  placed  before  us.   We  have
perused the affidavit and it  substantially  complies  with  the  conditions
stipulated in the newly introduced proviso.  May be the appellant did it  by
way of abundant caution to avoid any litigation.

41.   However, the respondent submitted before us that there is  nothing  in
the impugned order of the Magistrate which  indicates  that  the  Magistrate
applied his mind to such an affidavit and satisfied that it is necessary  to
deliver possession of the secured asset to the  appellant.   No  doubt  that
there is no material on record to show that the Magistrate applied his  mind
to the facts stated in the affidavit filed by the appellant.   On  the  date
of the impugned order the law did not oblige  the  Magistrate  to  undertake
any such exercise.  Apart from that we are satisfied on examination  of  the
content of the affidavit that  all  the  basic  requirements  necessary  for
granting the request of the appellant of delivery of the possession  of  the
secured asset are asserted to have  existed  on  the  date  of  application.
Therefore, we do not see any illegality in the impugned order.   The  appeal
is allowed.  The order of the High Court is set aside.


42.   In view of our conclusion on the scope of section 17 recorded  earlier
it would normally have been open to  the  respondent  to  prefer  an  appeal
under section 17 raising objections regarding legality of  the  decision  of
the Magistrate to deprive the respondent of the possession  of  the  secured
asset. But in view of the fact that the respondent chose  to  challenge  the
decision of the magistrate by invoking the jurisdiction of  the  High  Court
under Article 226 of the Constitution and in  view  of  the  fact  that  the
respondent does not have any substantive objection as can be discerned  from
the record, we make it clear that the respondent in the instant  case  would
not be entitled to avail the remedy  under  section  17  as  the  respondent
stalled the proceedings for a period of almost 4 years

  It  is  worthwhileremembering that the respondent did not even choose to raise any  objectionsto the demand issued under section 13(2) of the Act. 

 However,  we  make  itclear that it is always open to the respondent to seek  restoration  of  hisproperty by complying with sub-section 8 of section 13 of the Act.
Criminal Appeal arising out of SLP (Crl) No. 6560 of 2011

43.   The first respondent in this appeal is the borrower in  a  transaction
to which V. Noble Kumar, the first respondent  in  Criminal  Appeal  arising
out of SLP(Crl) No. 2038 of 2011 was the surety.  The issue  in  the  appeal
is identical.  Therefore, for the reasons stated above, this appeal is  also
allowed.


                           ...............................................J.
                                         (H.L. Gokhale)




                           ...............................................J.
                                         (J. Chelameswar)
New Delhi;
August 22, 2013.