M/S Bharat Steel Tubes Ltd Etc. Vs. Ifci Ltd & Ors.

M/S Bharat Steel Tubes Ltd Etc. Vs. Ifci Ltd & Ors. on 4 April, 2011

Author: A Kabir

Bench: Altamas Kabir, Cyriac Joseph

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE PETITION (CIVIL) NOS.9728-9729 OF 2011
( CC 4966-4967/2011)

M/s Bharat Steel Tubes Ltd. etc. ... Petitioner Vs.
IFCI Ltd. & Ors. ... Respondents J U D G M E N T
ALTAMAS KABIR, J.


1. Permission to file Special Leave Petitions is granted.


2. In these Special Leave Petitions, M/s Bharat Steel Tubes Ltd. has challenged the judgment and order dated 9th July, 2010, passed by a Division Bench of the Delhi High Court in WP(C) No.7097 of 2008, holding that the Respondent, Industrial Finance Corporation of India Limited is a "financial institution" under Section 4A(2) of the Companies Act, 1956, read with Section 2(1)(m) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (hereinafter referred to as `the SARFAESI Act') and that, as a consequence, the Respondent IFCI Ltd. would be entitled to take recourse to the provisions of the SARFAESI Act in order to enforce a "security interest" which had accrued in its favour. The Petitioner has also challenged an order passed by a Single Bench of the Delhi High Court on 10th September, 2010, in I.A.No.12908/09 in 3
CS(OS)No.1886 of 2009 vacating the injunction order earlier passed in the suit.


3. Appearing for the Petitioner, Mr. Rakesh Dwivedi, learned Senior Advocate, firstly drew our attention to Section 4A of the Companies Act, 1956, which was introduced by way of an amendment with effect from 1st February, 1975, defining "Public Financial Institutions". It provides that the various financial institutions specified in Sub- Section (1), including the Industrial Finance Corporation of India, established under Section 3 of the Industrial Finance Corporation Act, 1948, is to be regarded for the purposes of the said Act, as a public financial institution. Learned counsel also pointed out that Sub-Section (2) of Section 4A also provides that subject to the provisions of Sub-Section (1), the Central Government may, by notification in the Official Gazette, specify such other institutions as it may think fit to be a public financial institution. A limitation, 4
however, has been imposed on the said powers of the Central Government by the proviso to Sub-Section (2) which provides that no institution is to be specified as a public financial institution unless:-
(i) It has been established or constituted by or under any Central Act; or
(ii) Not less than 51% of the paid-up share capital of such institution is held or controlled by the Central Government.


4. Mr. Dwivedi submitted that while clause (i) of the proviso to Sub-Section (2) of Section 4A of the above Act is not attracted to the facts of this case, the second clause would have been attracted, but for the fact that at the relevant point of time and even now the Central Government does not hold or control 51% or more of the paid-up share capital of the institution concerned. Mr. Dwivedi submitted that on account of disinvestment at regular 5
intervals, the Central Government does not hold any share in the Company and the day it ceased to hold 51% or more of the paid-up share capital, it ceased to enjoy the benefits of Section 4A(ii) and became a private company which could no longer be covered by the definition of "public financial institution" in Section 4A of the Companies Act, 1956. It was submitted that even if the Central Government continue to hold shares in the Company, its status would be that of any other private shareholder and the Corporation could no longer enjoy the status of a Public Financial Institution given to it under Section 4A of the Companies Act, 1956.


change and the Corporation was incorporated as a Company as defined in Section 1(i)(b) of the aforesaid Act. Mr. Dwivedi pointed out that under Section 3, the undertaking of the Corporation was to vest in the Company on a date to be appointed by notification in the Official Gazette and on the said date the undertaking of the Corporation would stand transferred and vested in the newly- incorporated Company. It appears that the appointed date was subsequently notified as 1st July, 1993.


5. In order to bolster his submissions, Mr. Dwivedi referred to the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, hereinafter referred to as "the 1993 Act", whereunder the nature and character of the Industrial Finance Corporation of India underwent a 6

6. It was also pointed out by Mr. Dwivedi that Section 4 of the 1993 Act mentions the general effect of vesting of an undertaking in the Company to be so incorporated. By virtue of Sub-Section (2) of Section 4, the undertaking of the Corporation, which was transferred to and vests in the Company under Section 3, shall be deemed to include all the various items set out in Sub- Section (2) of Section 4. In addition, under Sub- 7
Section (3) of Section 4, all contracts, deeds, bonds, guarantees, powers of attorney, other instruments and working arrangements subsisting immediately before the appointed date and affecting the Corporation would cease to have effect or to be enforceable against the Corporation and would be of full force and effect against or in favour of the Company, in which the undertaking of the Corporation had vested.

company was saved or continued under Section 5 of the Act and, accordingly, once the Central Government ceased to hold 51% or more of the paid- up share capital of the Company, it ceased to enjoy the benefits under Section 5 of the 1993 Act. 


7. Reference was then made to Sub-Section (5) of Section 4, whereunder with effect from the appointed date, fiscal and other concessions, licences, benefits, privileges and exemptions granted to the Corporation in connection with the affairs and business of the Corporation under any law for the time being in force would be deemed to have been granted to the Company. Mr. Dwivedi contended that under the said provision, it could not be said that the status given to the Respondent 8

8. Mr. Dwivedi submitted that since the Respondent No.1 Company no longer fulfilled the criteria contained in Clause (ii) of the proviso to Sub- Section (2) of Section 4A of the Companies Act, 1956, it had lost the status given to it under Clause (ii) of Sub-Section (1) of Section 4A thereof and was not, therefore, entitled to invoke the provisions of the SARFAESI Act, 2002, notwithstanding the provisions of Section 5 of the 1993 Act.

Respondent No.1 before the Delhi High Court in Writ Petition (Civil)4596 of 2006, which would be reflected from the judgment delivered therein on 17th August, 2010. Mr. Dwivedi pointed out that in paragraph 10 of the judgment it had been mentioned by the learned Single Judge that a submission had been advanced on behalf of the Respondent No.1 Company that it was neither substantially financed by the Central Government nor did the Central Government hold any share whatsoever in the Respondent No.1 Company.


9. Mr. Dwivedi also pointed out that the fact that the Respondent No.1 Company was no longer a public company under the control of the Central Government, had also been admitted on behalf of the 9

der Clause (ii) of Section 4A(1) of the Companies Act, 1956. Mr. Venugopal submitted that in exercise of the powers conferred by Sub-Section (2) of Section 4A of the aforesaid Act, the Central Government issued Notification No.S.O.98(E) dated 15th February, 1995, specifying the Industrial Finance Corporation of India Limited formed and registered under the Companies Act, 1956, to be a financial institution and, accordingly, amended the Notification issued by the Government of India, Ministry of Law, Justice and Company Affairs (Department of Company Affairs) No.S.O.1329 dated 8th May, 1978, to include the Industrial Finance Corporation of India Limited in the said notification.


10. Mr. K.K. Venugopal, learned Senior Advocate, appearing for the Respondent No.1 Company, on the other hand, contended that Section 5 of the aforesaid Act was in the nature of a saving clause, whereby all matters relating to the Corporation stood wholly transferred in favour of the new Company after its incorporation, including, the status which had been afforded to the Corporation 10


Companies Act, 1956, as a public financial institution and that, in effect, more than 4,000 cases filed by the Respondent No.1 Company in its capacity as a public financial institution were pending and would be rendered infructuous if the interpretation being sought to be given on behalf of the Petitioner in relation to the status of the Respondent No.1 Company was to be accepted.

11. Mr. Venugopal urged that the mere fact that the Respondent No.1 Company was no longer under the control of the Central Government did not affect or alter its status under Section 4A(1)(ii) of the 11

12. Having regard to the large number of cases filed by the Respondent No.2 Company, in its capacity as a public financial institution, which are said to be pending, we have given our anxious consideration to the submissions advanced on behalf of the respective parties and the provisions of the Companies Act, 1956, and the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993.

13. Section 4A of the Companies Act, 1956, as far as the Industrial Finance Corporation of India Limited is concerned, provides as follows :- 4A. Public financial institutions.-

(1) Each of the financial institutions specified in this sub-section shall be regarded, for the purposes of this Act, as a public financial institution, namely:-

(i) .......................................................................................... (ii) the Industrial Finance Corporation of India, established under Section 3 of the Industrial Finance Corporation Act, 1948 (7 of 1948);

(iii) .......................................................................................... (iv) .......................................................................................... (v) .......................................................................................... (vi) .......................................................................................... (vii) .......................................................................................... (2) Subject to the provisions of sub-section (1) the Central Government may, by notification in the Official Gazette, specify such other institution as it may think fit to be a public financial institution:

Provided that no institution shall be so specified unless-

13

(i) it has been established or constituted by or under any Central Act, or

(ii) not less than fifty-one per cent, of the paid-up share capital of such institution is held or controlled by the Central Government."

14. In our view, the provisions of Sub-Section (1) of Section 4A stand independent of Sub-Section (2) and the financial institutions named in Sub-Section (1) of Section 4A recognize the financial institutions mentioned therein to be public financial institutions which are not covered by the embargo enforced by the proviso to Sub-Section (2) of the said Section. The proviso controls the width of Sub-Section (2) which refers to the powers of the Central Government to specify by notification in the Official Gazette and subject to the provisions of Sub-Section (1), such other institutions as it may think fit to be a public financial institution. It appears to us that Sub- Section (2) of Section 4A is applicable only to institutions which are not mentioned in Sub-Section 14

(1). It is the latter category of financial institutions to which the proviso applies. In view of Section 4 A(1)(ii) of the Companies Act, 1956, the Industrial Finance Corporation of India was admittedly regarded as a `public financial institution' for the purpose of the said Act. The conversion of the Industrial Finance Corporation of India into a Company did not alter its position and status as a financial institution in view of Section 5 of the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993, which, as pointed out by Mr. K.K. Venugopal, was in the nature of a saving clause, whereby all matters, including all benefits, relating to the Corporation, stood wholly transferred in favour of the new Company.

15. Mr. Dwivedi has submitted that the Notification dated 15th February, 1995, had been issued under Section 4A(2) of the Companies Act which will have 15

to conform to the proviso thereto. Mr. Dwivedi has contended that both the conditions in the proviso would have to be fulfilled in order to be eligible for being specified as a public financial institution. We are unable to accept such contention in view of the fact that clauses (i) and (ii) are not conjunctive but disjunctive and even though Clause (ii) may not have any application to the Respondent No.1 Company, it was covered by clause (i), since it was constituted under the Companies Act, 1956, which is a Central Act.

16. We, therefore, find no reason to interfere with the judgment and orders of the High Court impugned in these Special Leave Petitions, which are, accordingly, dismissed.

17. There shall, however, be no order as to costs. ................................................J. (ALTAMAS KABIR)

16

................................................J. (CYRIAC JOSEPH)

New Delhi

Dated:4.4.2011

The Madras High Court has set aside an order of the DRAT-Subhiksha MD case directive quashed

Source : express News servic :Oct 16,2011

CHENNAI: The Madras High Court has set aside an order of the Debt Recovery Appellate Tribunal (DRAT) quashing the order of the Debt Recovery Tribunal (DRT), which directed the MD of the defunct Subhiksha Trading Services Limited to surrender his passport, thereby preventing him from leaving the country.

Subhiksha had borrowed nearly Rs 222 crore from� the ICICI Bank in Ambattur Industrial Estate in 2005. Company MD R Subramanian executed personal guarantee for the loan amount.� As the company defaulted in returning the loan amount, the bank moved the DRT, which, on September 30, 2010, directed Subramanian to surrender his passport, in an interim order. He moved the DR Appellate Tribunal, which on August 12 this year, set aside the order of the DRT, after holding that the DRT had no authority under law to impound the passport. The passport authority alone was empowered to do so under the Passport Act, the DRAT had held. Aggrieved, the bank moved the Madras High Court with the present writ petition.

Allowing the petition, a division bench comprising Justice D Murugesan and Justice KK Sasidharan noted that Subhiksha had shut its business for several months and it deliberately did not finalise its books of accounts since March 2007 and the accounts had not been audited till 2008.

The company had also borrowed Rs 800 crore from various other lenders and claimed that it had no assets.

It had also transferred various assets to defeat the claim of the ICICI bank and other lenders.

The Bench held that the powers conferred upon the DRT to pass interim orders, particularly under Section 19(25) of the Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFIA), were wide enough to pass the order for impounding the passport and quashed the DRAT order.

DRT, Visakhapatnam in OA 796/06 -Is it justice in INDIA?

Source :Anonymous has left a new comment :16th Oct 2011




DRT in the verdit

on OA 796/o6 (DRT- Visakapatnam)

said

" the bank did not maintain the accounts properly

in the loan account and there is no explanation from

the bank so far as maintaining of the acount is concernred

and it is clear in all the bank cases and the account copy

will fasten the liability but in this case the account copy

itself is incorrect and people will believe the account copy

of the bank and this account copy seems to be totally

incorrect inview of the several pay slips filed

by the defendents which are marked

as EX B13 to EX B18 containing many books.

In these CIRCUMSTANCES THEACCOUNT COPY

CANNOT BE BELIVED AND THEREFORE THE OAhas to be

allowed only for the amount of Rs. 1128685/- with simple interest 6%pa.,

from the date of OA till realisation.


This recovery certificate is being issued

since it is public money and there is no document

to show how much amount acually due to the applicant bank.

The bank never proved the amount due.

It is the intial burden on the bank according to the

Evidence Act Sec 101 to 103 and the intial burden is not

discharged by the bank.

Therfore, the bank cannot base on the demerits

of the defendents case."

DRT, Visakhapatnam in OA 796/06

Is it justice in INDIA?

ANYBODY REALLY PROVE JUSTICE IN INDIA STILL ALIVE ? 

Directed to hand over possession of the properties belonging to the appellant

M/s.Hubert furnishers V/S The Chief manager, Punjab& sind bank 


R.A(S.A):209/2010

1.         This appeal impugns the ‘common order’ dated 20.08.2010 passed by the Learned Presiding Officer, DRT-I Chennai in SA No.135/2006 and SIA No.89/2010 in SA No.135/2006.

2.         The case of the appellant may be stated as follows:

It is stated that the appellant filed SA No.135/2006 before DRT-I Chennai challenging the Section 13(4) notice issued by the respondent bank claiming a sum of Rs.78,96,805/- on the ground that the action of the respondents under Section 13(4) of the Act is void ab initio as it has been initiated by a person who is not an Authorized Officer under the Securitization Act and that the respondent bank also failed to comply with the provisions of the SARFAESI Act. 

 It is stated that the tribunal below by its interim order dated 23.11.2005 directed the appellant to pay a sum of Rs.70,00,000/- to the bank and in the event of such deposit being made the respondent bank was directed to redeliver possession of the shop of the appellant.  It is also stated that the tribunal directed the bank to release the title documents if the appellant brings in a buyer offering not less than Rs.60 lakhs. It is stated that the appellant complied with the second part of the order by depositing Rs.60 lakhs on 30.1.2006. 

 It is stated that during this period RBI issued guidelines for an One Time Settlement for SME accounts vide Circular No. RPCD.PLNFS.BC No.39/06-02-31/2005-06 dated 3.9.2005 and the respondent bank issued circular No.176 dated 18.10.2005 wherein the bank made changes to the effect that the amount recoverable is as stated in the RBI guidelines or 70% of the value of securities, whichever is higher. 

 It is stated that the appellant immediately submitted its proposal under the above RBI guidelines on 27.3.2006.  It is stated that the entire amount demanded by the bank under Section 13(2) has been paid and it is further stated that as the appellant had paid the entire amount as required under the policy guidelines issued by the RBI for OTS-SME account and adopted by the respondent bank it cannot initiate any action under the SARFAESI Act.  It is stated that as per RBI guidelines dated 3.9.2005 the petitioner had to pay only Rs.62,69,941/- whereas the appellant had paid a sum of Rs.81,89,500/- and therefore the appellant had paid a sum of Rs.19,19,550/- in excess.  It is stated that in all fairness the excess amount paid by the appellant has to be refunded.  

The appellant relied upon the judgment of the Hon’ble Supreme Court in the case of “Sardar Associates Vs. Punjab & Sind Bank 2009 (8) SCC 257” and stated that the tribunal below has failed to consider the said judgment and also failed to consider the fact that the proceedings under the SARFAESI Act was initiated by a person who is not an Authorized Officer under the Act.  It is stated the tribunal below erroneously dismissed the SA No. 135/2006 and prayed that the appeal be allowed.

3.         The Ld. Counsel for the appellant drew the attention of this Tribunal to the judgment of the Hon’ble Supreme Court of India in the case of “Sardar Associates” and stated that it is squarely applicable to the case of the appellant.  The Ld. Counsel also stated that the respondent bank ought to have extended the benefit of the One Time Settlement as per the RBI circular.  The Ld. Counsel added that the respondent bank failed to adhere to the provisions of the SARFAESI Act and the Rules made thereunder. The Ld. Counsel prayed for allowing the appeal.

4.         The appellants filed their written submissions and the typed set of documents and the same forms part of the record.

5.         The Ld. Counsel for the respondent bank stated that the order of the Ld. Presiding Officer, DRT-I Chennai is proper and that the secured creditor being the bank has followed the provisions of the SARFAESI Act properly to recover public money.  He prayed that the appeal be dismissed.

6.         Heard the Ld. Counsel.

7.         A perusal of the RBI Circular dated 3.9.2005 in RBI/2005-06/153: RPCD.PLNFS.BC.No. 39/06.02.31/2005-06 reveals that the appellants were entitled to a One Time Settlement (OTS) by payment of 100% of the outstanding balance in the account as on the date on which the account was classified as a NPA.  A reading of Section 13(2) notice reveals that the account was classified as a NPA in March 2001. 

The amount outstanding in the account on the date of classification of the account as NPA as seen from the submissions of the appellant before the Tribunal below, before this Tribunal  and before the Hon’ble High Court of Madras is Rs.62,69,941/-.  

In view of the said circular dated 3.9.2005 the petitioner was entitled to be granted an OTS on payment of 100% of the outstanding balance as on 31.3.2004 which was Rs.62,69,941/-and was also entitled to have the account closed.  In view of the law laid down by the Hon’ble Supreme Court of India in the case of “Sardar Associates Vs. Punjab & Sind Bank”, the appellant was due to pay only a sum of Rs.62,69,941/- and the amount had to be reckoned only purely based on the guidelines on One Time Settlement for SME Accounts by the RBI in its circular dated 3.9.2005 and not on the value of the mortgaged properly as the Hon’ble Supreme Court of India was pleased to hold that “the Directors of the Respondent Bank could not have taken recourse to a policy decision which is per se discriminatory”..

  It is seen that the appellant was seriously trying to bring into effect the OTS to which it was entitled to, but the appellant was compelled to approach the DRT due to the illegal proceedings of the bank and pursuant to the order of the DRT the appellant had paid a sum of Rs.60 lakhs.  However not withstanding the payment of Rs.60 lakhs and notwithstanding the eligibility of the appellant to get the OTS on payment of 100% of the outstanding balance in the account as on the date of classification of the account as NPA being Rs.62,69,941/- the bank had ventured to proceed under the provisions of the SARFAESI Act and took physical possession of the secured asset i.e., the shop of the appellant and such a proceeding in the background of the entitlement of the appellant to the OTS Scheme and in the background of the law laid down by the Hon’ble Supreme Court of India has to be termed only as illegal.

  Apart from the above all the proceedings under Section 13(4) of the Act have not been carried out in adherence to the provisions of the Act and the Rules made thereunder and added to this the secured asset still continues to be in possession of the bank and it can be easily said that by the act of taking possession of the secured asset and the bank being in continued physical possession of the secured asset for the last over 6 years it has effectively prevented the appellants’ Managing Partner to conduct the business and eke out his livelihood inspite of having paid sums of money more than that was required to be paid as per the RBI circular.

8.         It is seen that the bank was duty bound to inform the appellant about the appellant’s eligibility to be considered for the OTS Scheme and that the bank failed in its duty to inform the appellant.  

A perusal of the letter written by the appellant to the bank dated 27.3.2006 reveals that the bank did not inform the appellant about the availability of the OTS and that the appellant by having come to know about the RBI Circular through its own sources addressed the letter to the bank asking for the implementation of the RBI circular in its case.

  It is seen that the bank by its letter dated 12.5.2006 replied to the appellant totally ignoring the circular and asked the appellant to increase its offer.  It can be seen that the bank has chosen to ignore the RBI guidelines which it was bound to follow and it has also preferred to remain silent about the RBI guidelines in its letter.  

It is seen once again that the appellant wrote a letter dated 18.5.2006 to the bank and the bank by its reply dated 31.5.2006 stated that the appellant should give a minimum offer of Rs.38.50 lakhs for consideration of the proposal for OTS. From this letter dated 31.5.2006 of the respondent bank it can be seen that the bank was ready for an OTS being offered to the appellant at Rs.38.50 lakhs as on 31.5.2006. 

 A reading of the said letter dated 31.5.2006 also reveals that the bank had once again chosen to ignore the RBI guidelines, the benefit of which the appellant was entitled to.  According to its own letter the bank had offered the OTS at Rs.38.50 lakhs.  In response to the letter of the bank dated 31.5.2006 the appellant sent a reply dated 8.6.2006 stating therein that a sum of Rs.60 lakhs has already been paid by the appellant pursuant to the order of the DRT-I Chennai and that the appellants were ready to pay a further sum of Rs.20,39,500/-. 

 From the above letter it can be seen that though the bank had offered the OTS at Rs.38.50 lakhs the appellant had already paid a sum of Rs.60 lakhs and was ready to pay a further sum of Rs.20,39,500 for a settlement.  It can be seen that the appellant was entitled to get the OTS on the balance due and payable on the date of classification of its accounts as a NPA in March 2001 for a sum being Rs.62,69,941/-and that the said OTS was neither informed nor offered by the bank and the bank after being approached by the appellant had finally settled the OTS amount at Rs.38.50 lakhs.  

The bank after the receipt of the communication from the appellant dated 8.6.2006 did not choose to respond to the said letter and the appellant thereafter sent a reminder dated 15.12.2006 to the bank.  It is seen that the bank after receipt of the appellant’s reminder letter dated 15.12.2006 chose to take physical possession of the property stating specifically in the possession notice that the bank was entitled to a sum of Rs.48,73,986/- as on 26.12.2006.

9.         It can be seen that as the appellant was entitled to OTS the bank ought to have issued the notice for OTS and received the OTS amount from the appellant and ought not to have proceeded under the provisions of the SARFAESI Act.  

The respondent bank has not abided by the RBI circular and has also not informed the appellant about the OTS but has chosen to proceed under the provisions of the SARFAESI Act and thus has caused great prejudice to the appellant.  It can be seen that the respondent bank also failed to obey the dictum of the Hon’ble Supreme Court of India. 

 The Respondent bank has neither chosen to obey the dictum of the Hon’ble Supreme Court of India nor has chosen to adhere to the circular / guidelines issued by the RBI and by its act has caused great prejudice to the appellant and has made the appellant to run from pillar to post for the last several years. 

 It can also be seen that the appellant has already paid a sum of Rs.80 lakhs which is much more than what was required to be paid under the OTS and it can also be seen that the bank has deprived the appellant the benefit of the OTS and has proceeded against the appellant in the securitization proceedings in violation of the RBI Circular dated 3.9.2005.

10.       It is seen that the secured creditor in this case i.e., the respondent bank had issued notice under Section 13(2) of the SARFAESI Act by its communication dated 13.11.2004 and the signatory of the said notice is Shri H.S. Brar, Chief Manager of the bank and the same was replied to b the appellant by its letter dated 19.11.2004.  

The bank considered the reply by its communication dated 29.11.2004.  It is seen that thereafter once again a demand notice dated 2.2.2005 had been issued by the Chief Manager under Section 13(2) of the SARFAESI Act as the wife of the Managing Director had died.  Thereafter, the publications with respect to the demand notice dated 2.2.2005 were effected. 

11.       It is seen Shri H.S. Brar, Chief Manager and Authorized Officer of the respondent bank issued a letter dated 27.1.2005 to Shri M.R. Gopinath, Officer, Punjab and Sind Bank stating that he is the Authorized Officer of the account for taking action under SARFAESI Act, 2002 and that he is authorizing the said Shri M.R. Gopinath to appear on behalf him before the Chief Metropolitan Magistrate Court, Egmore, Chennai in the proceedings initiated by the bank under Section 14 of the SARFAESI Act.  A perusal of C.M.P. No. 1459/2005 filed under Section 14 of the SARFAESI Act before the Chief Metropolitan Magistrate, Egmore, Chennai depicts that Shri M.R. Gopinath as the Authorized Officer in this case. 

Thereafter an Advocate Commissioner was appointed by the Chief Metropolitan Magistrate, Egmore, Chennai by order dated 30.5.2005 and the Advocate Commissioner proceeded to take possession of the shop at 185, Royapettah High Road, Chennai.

  The proceedings of the Advocate Commissioner reveals that no notice of taking of possession has been served on the appellant and a copy of the inventory was also not served to the appellant.  It is seen that the Advocate Commissioner after taking possession has given the keys of the property to Shri M.R. Gopinath and who in turn gave the keys to one Shri Thiyagarajan who is stated to be a security agent.  A communication dated 11.6.2005written by the said Shri M.R. Gopinath to the Chief Manager, Punjab & Sind Bank, 161, Mount Road reveals that he was acting under the instructions of the Chief Manager and he has described himself as the “Authorized Officer of the case”.  

The publications that are required to be effected for the taking of possession have been done nearly after a year after the date of taking of possession. 

 Further the notice under Rule 8(6) of Security Interest (Enforcement) Rules, 2002 for the sale of the property reflects no date. 

12.       It is also seen that the appellant had approached the Criminal Court by filing Cr. M.P. No. 878/2005 in CC No. 17359/2005 on the file of XIII Metropolitan Magistrate, Egmore, Chennai and had filed a private complaint against the said Shri M.R. Gopinath and Shri H.S. Brar and that the criminal court had dismissed the application by its order dated 23.8.2005 and that the appellant aggrieved by the said order filed Crl. R.C. No.1503/2005 before the Hon’ble High Court of Madras.  

The Hon’ble High Court of Madras by its order dated 3.2.2011 set aside the order of the Magistrate and directed a trial against Shri M.R. Gopinath for the offences stated in the private complaint in C.C. No. 17359/2005.

Rule 2(a) of Security Interest (Enforcement) Rules, 2002 reads thus:

“Authorized Officer” means an officer not less than a chief manager of a public sector bank or equivalent, as specified by the Board of Directors of Board of Trustees of the secured creditor or any other person or authority exercising powers of superintendence, direction and control of the business or affairs of the secured creditor, as the case may be, to exercise the rights of a secured creditor under the Act.”

13.       From a conjoint reading of the above rule and the letter dated 27.1.2005 written by Shri H.S. Brar it can be seen that the Authorized Officer under the provisions of the SARFAESI Act is Shri H.S. Brar and not Shri M.R. Gopinath. 

 From the Criminal Miscellaneous Petition filed by the appellant before the Chief Metropolitan Magistrate, Egmore, Chennai and from the letter of Shri M.R. Gopinath dated 11.6.2006 and from the proceedings of the Advocate Commissioner it can be seen that Shri M.R. Gopinath has acted as the Authorized Officer though the provisions of the Act and the Rules made thereunder do not permit Shri M.R. Gopinath who is not a Chief Manager to be the Authorized Officer and such being the case Shri M.R. Gopinath cannot be the Authorized Officer in this case and whatever actions that had been taken by him as the Authorized Officer in this case are liable to be set aside as all his actions under the SARFAESI Act as the Authorized Officer are in violation of the SARFAESI Act and the Rules made thereunder.  

Therefore the act of Shri M.R. Gopinath in taking physical possession, the act of Shri M.R. Gopinath receiving the possession of the property from the Advocate Commissioner as the Authorized Officer, the act of Shri M.R. Gopinath in handing over the physical possession of the property to a third party agent and the act of Shri M.R. Gopinath addressing himself as the Authorized Officer in this case are all acts done by the said Shri M.R. Gopinath, Officer of the Punjab & Sind Bank and the said acts can only be termed as illegal as he had no authority therefor.

14.       Further it is seen that the copy of the possession notice was not served on the appellant and it is also seen that the publications were not effected as it is required to be effected and therefore the taking of possession of the secured asset is liable to be set aside.

15.       The notice issued under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 for the sale of the property is also not in consonance with the Act and the Rules framed thereunder.  Therefore in this case it can be seen that the secured creditor being Punjab & Sind Bank has permitted a person who is not Authorized under the Act to be an Authorized Officer and the said unauthorized person has usurped the powers of the Authorized Officer and has committed illegalities in the enforcement of the rights of the secured creditor and that the said officer has also acted in contravention to the provisions of the Security Interest (Enforcement) Rules, 2002 and therefore the entire exercise of the secured creditor right from taking physical possession of the shop on 11.6.2005 and thereafter can only be said to be a series of contraventions of the provisions of the Act and the Rules made thereunder. 

 Therefore it has to be concluded that the proceedings taken up by the secured creditor firstly through Shri H.S. Brar and secondly through Shri M.R. Gopinath are in contravention of the SARFAESI Act and the Rules made thereunder.

16.       Therefore from the fact that the respondent bank failed to abide by the RBI guidelines to offer OTS to the appellant, from the fact that the respondent bank denied the opportunity to the appellant to have the benefit of the RBI guidelines, from the fact that the appellant was eligible for the grant of OTS, from the fact that it is averred that the appellant had paid much more money than the amount stipulated in the RBI guidelines, from the fact that the respondent bank failed to act as per the law laid down by the Hon’ble Supreme Court of India in the case of “Sardar Associates”, from the fact that the respondent bank could not have initiated proceedings under the Securitization Act, from the fact that the Authorized Officer in this case Shri M.R. Gopinath had no authority to act as an Authorized Officer, from the fact that no notice of possession was ever served on the appellant, from the fact that the copy of the inventory was never given to the appellant, from the fact that the publications of the possession notice were not effected as prescribed under the rules, from the fact that the said Shri M.R. Gopinath averred that he is the Authorized Officer though he is not the Authorized Officer during the Section 14 proceedings before the Chief Metropolitan Magistrate, Egmore, Chennai, from the fact that there were numerous contraventions of the provisions of the Act by the so called Authorized Officer, this Tribunal is driven to conclude that the proceedings taken up by the secured creditor are in contravention to the provisions of the Securitization Act and the Rules made thereunder and therefore driven to conclude that the SA filed by the appellant before the Tribunal below was entitled to be allowed by the Tribunal below and that the tribunal below had erroneously dismissed the SA.  

Therefore the order of the Ld. Presiding Officer, DRT-I Chennai dated 20.8.2010 in SA No. 135/2006 is hereby set aside.

17.       In the result the appeal is allowed.

18.       In view of the above it can be seen that the secured creditor can no longer continue to be in physical possession of whatever property it has taken physical possession of and that the appellant is entitled to have the possession of the same. Therefore the Chief Manager, Punjab & Sind Bank, 161, Mount Road, Chennai-2 is directed to hand over possession of the properties belonging to the appellant which have been taken physical possession of within a period of seven days from the date of receipt of copy of this order.

19.       Further as the appellant has established that it is entitled to the benefit of the RBI Circular in the matter of One Time Settlement, the respondent bank is directed to implement the Circular No. RPCD.PLNFS.BC No.39/06-02-31/2005-06 dated 3.9.2005 in the case of the appellant.

Chennai.7th oct 2011

Delay of 51 days in filing the appeal - Dismissed

M/s.Alengar constructions (HUF) V/S Indian bank 
A.IR:223/2010

IA 468/10 (delay) :This is an IA filed for the condonation of the delay of 51 days in filing the appeal against the order passed in IA 891/2002 in OA No.341/2007 (old No.944/1999).

      

Ld.  Counsel appearing on behalf of the petitioner stated that reasons for the delay have been set out in paragraph 4 and 5 of the affidavit filed in support of the petition and prayed that the delay of 51 days in filing the appeal  be condoned for the  reasons stated therein and this IA be allowed.

Ld.  Counsel Shri Balasubramaniam appearing on behalf of the respondent bank stated that the bank has filed a counter and that the dues to the bank is more than Rs.50.00 crores and that a perusal of the said paragraphs 4 and 5 would reveal that the petitioner has not made out a case for the condonation of delay as the petitioner has not sufficiently explained the cause for the delay and prayed that the petition may be dismissed.

Heard the Ld. Counsel.

A perusal of paragraphs 4 and 5 of the affidavit filed in support of the petitioner reveals that the petitioner is a Hindu Undivided Family i.e. HUF and that its Kartha is now residing in Chidambaram and Thirunelveli and that there is no office for the petitioner at Chennai.  

 It is stated in paragraph 4 of the affidavit that the copy of the order dt 23.11.2009 passed in IA No.891/02 on the file of DRT-II, Chennai was not served on the petitioner and that the petitioner came to know about the order only on 12.1.2010 and the certified copy of the order was obtained by the petitioner on 13.1.2010. 

 It is also stated in paragraph 5 of the affidavit that due to the Pongal holidays the Kartha and his family had gone to their native place Thirunelveli and returned to Chidambaram and  that they were able contact their advocate only in the first week of February, 2010 and that the delay of 51 days had occurred in this case. 

 It is stated that due to the aforesaid reasons the delay of 51 days be had been occasioned and it is prayed that this IA be allowed and the delay of 51 days in filing the appeal be condoned. 

It is seen that the Kartha of the petitioner had gone to Thirunelveli along with family members and that they contacted their advocate in Chennai only in the first week of February, 2010.  No reason has been stated for their inability to contact their counsel at Chennai and in the absence of any reason being set out for their inability to contact their counsel at Chennai it can been seen that the reasons set out by the petitioner in the affidavit do not in any way show that the petitioner was prevented by sufficient cause from filing the appeal within the time prescribed and also do not explain the delay of 51 days.  

It is also seen that a sum of more than Rs.50.00 crores of public money is to be recovered from the petitioner and the OA is pending for the last 11 years.

In view of the fact that the petitioner has not explained the delay properly and that a sum of more than Rs.50.00 crores is due and recoverable from the petitioner and in view of the fact that the OA itself is pending for more than 11 years this Tribunal is compelled to dismiss this IA.  

Accordingly this IA is dismissed.

Chennai 7th oct 2011