THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO AND THE HONBLE DR. JUSTICE B. SIVA SANKARA RAO
WRIT PETITION No. 41006 OF 2015
16-02-2016
Sri C. Malla Reddy ....Petitioner
The Authorized Officer, IDBI Bank Limited, Hyderabad & others..Respondents
Counsel for the Petitioner:Sri K. Gopala Krishna Murthy
Counsel for Respondent No.3:Sri M.A. Mujeeb
<GIST:
>HEAD NOTE:
? Cases referred
THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO
AND
THE HONBLE DR. JUSTICE B. SIVA SANKARA RAO
WRIT PETITION No. 41006 OF 2015
O R D E R: (per Honble Sri Justice Nooty Ramamohana Rao)
This Petition under Article 226 of the Constitution of India
seeks a writ of mandamus for declaring the action of Respondents
1 and 2 in taking possession of the residential house bearing D.No.
1-5-230 situated in Survey No. 51/AA, Alwal Village, Malkajgiri
Mandal, Ranga Reddy District, as arbitrary, illegal and
unconstitutional and hence, to direct Respondents 1 and 2
together with the 3rd respondent Advocate-Commissioner
appointed in Crl.M.P.No. 654 of 2015 on the file of the Chief
Metropolitan Magistrate, Ranga Reddy District at L.B.Nagar to
forthwith restore the possession of the house property described
supra to the petitioner and also to quash the proceedings initiated
by Respondents 1 and 2 under the Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 against the agricultural properties in Survey No.
51/EE, Alwal Village, Malkajgiri Mandal, Ranga Reddy District and
also to order for stay of all further proceedings initiated by
Respondents 1 and 2 under the provisions of the aforementioned
Act.
The 4th respondent is stated to be a public limited company
carrying on business in software tracking including development of
required embedded software and mobile shopping software and
that it has availed certain financial assistance from the Industrial
Development Bank of India, whose Deputy General Manager is
impleaded as the 2nd respondent herein. The financial benefits
availed comprised of two components; 1) a term loan limited to
Rs.4 crores; and 2) a cash credit loan limited to Rs.3.70 crores in
the year 2009. The writ petitioner, in paragraph 6 of the affidavit
filed in support of this Writ Petition, would describe himself as a
nominal participant in the business of the said company and since
the bank has insisted, the petitioner has created an equitable
mortgage and secured the loan advanced to the 4th respondent
company. It is his specific case that he is an innocent 3rd party and
that he has been induced by the 4th respondent into creating the
security for the loan availed by it. It is not in dispute that a
mortgage has been created by depositing the title deeds on
18.02.2009 for the land of an extent of Ac.1.03 guntas situated in
Survey No. 51/EE of Alwal Village, Malkajgiri Mandal, Ranga
Reddy District.
Annexure-I to the deed of mortgage dealt with the security
created by the petitioner herein and it reads as under:
It is not in dispute that the credit facilities availed by the 4th
respondent company have remained un-liquidated and
consequently, the bank has declared the debt as a non-performing
asset.
The Parliament, with a view to regulate securitization and
reconstruction of financial assets and enforcement of security
interest and for matters connected therewith and incidental
thereto, enacted The Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(henceforth, for brevity referred to as the SARFAESI Act). The
expression bank has been defined in Section 2(c) which includes a
banking company or the State Bank of India or any subsidiary
bank or a multi-state co-operative bank or such other bank which
the Central Government may, by notification, specify for the
purposes of this Act. It is hardly in doubt that the bank in the
instant case answers this description as per the definition
contained in Section 2(c) of the Act. Section 2(f) defined the
expression borrower in the following terms:
borrower means any person who has been granted
financial assistance by any bank or financial institution or
who has given any guarantee or created any mortgage or
pledge as security for the financial assistance granted by any
bank or financial institution and include a person who
becomes borrower of a securitization company or
reconstruction company consequent upon acquisition by it of
any rights or interest of any bank or financial institution in
relation to such financial assistance.
Thus, going by the above said definition, whoever has given any
guarantee or created any mortgage or pledge as a security for the
financial assistance granted by any bank or financial institution to
another person also becomes a borrower. As was noticed by us
supra, the petitioner herein has created mortgage by depositing the
title deed for the land comprising of Ac.1.03 guntas lying in Survey
No. 51/EE of Alwal Village. Hence, he is liable to be treated as a
borrower of the bank.
The expression debt has been defined in Section 2(ha) to
carry the same meaning assigned to it in clause (g) of Section 2 of
the Recovery of Debts Due to Banks and Financial Institutions Act,
1993. In that enactment, the said expression has been defined as
under:
debt means any liability (inclusive of interest) which is claimed
as due from any person by a bank or a financial institution or by a
consortium of banks or financial institutions during the course of
any business activity undertaken by the bank or the financial
institution or the consortium under any law for the time being in
force, in cash or otherwise, whether secured or unsecured, or
assigned, or whether payable under a decree or order of any civil
court or any arbitration award or otherwise or under a mortgage and
subsisting on, and legally recoverable on, the date of the application.
From the above definition, there is hardly any doubt that there
exists a debt between the bank and the principal borrower, the 4th
respondent company.
The expression default has been defined in Section 2(j) as
meaning non-payment of any principal debt or interest thereon
or any other amount payable by a borrower to any secured creditor
consequent upon which the account of such borrower is classified
as non-performing asset in the books of account of the secured
creditor. Therefore, the failure to liquidate the outstanding liability
by the 4th respondent principal borrower amounted to committing
a default.
The expression financial asset has been defined in Section
2(l) in the following words:
financial asset means debt or receivables and includes
i) a claim to any debt or receivables or part thereof, whether
secured or unsecured; or
ii) any debt or receivables secured by, mortgage of, or charge on,
immovable property; or
iii) a mortgage, charge, hypothecation or pledge of movable
property; or
iv) any right or interest in the security, whether full or part
underlying such debt or receivables; or
v) any beneficial interest in property, whether movable or
immovable, or in such debt, receivables, whether such interest is
existing, future, accruing, conditional or contingent; or
vi) any financial assistance.
Thus, any debt or receivables secured by mortgage of or charge on
immovable property amounts to a financial asset.
The expression non-performing asset is defined in section
2(o) as under:
non-performing asset means an asset or account of a borrower,
which has been classified by a bank or financial institution as
substandard, doubtful or loss asset----
(a) in case such bank or financial institution is administered or
regulated by any authority or body established, constituted or
appointed by any law for the time being in force, in accordance with
the directions or guidelines relating to assets classifications issued
by such authority or body;
(b) in any other case, in accordance with the directions or guidelines
relating to assets classifications issued by the Reserve Bank.
While the expression property is defined in Section 2(t) as under:
property means
(i) immovable property;
(ii) movable property;
(iii) any debt or any right to receive payment of money, whether secured
or unsecured;
(iv) receivables, whether existing or future;
(v) intangible assets, being know-how, patent, copyright, trade mark,
licence, franchise or any other business or commercial right of
similar nature.
Section 13 is included in Chapter - III of the SARFAESI Act,
which dealt with Enforcement of Security Interest. Section 13
would set out that any security interest created in favour of any
secured creditor may be enforced, without the intervention of court
or tribunal, by such creditor in accordance with the provisions of
this Act. Thus, the SARFAESI Act is a special piece of legislation
made by the Parliament for achieving a special objective of
securing the enforcement of the security interest of the secured
creditor. That is the reason why a special provision is created in
sub-section (1) of Section 13 of the SARFAESI Act by making it
clear that the security interest created in favour of any secured
creditor can be got enforced without the intervention of the Court.
The intention of the Parliament is so very clear that it wanted to
address the malady of the defaults committed by the borrowers in
repayment of the debt due by them, resulting in getting into the
very vitals of the secured creditors and more particularly financial
institutions including those in the banking sector. Under
sub-section (2), the secured creditor, by delivering a notice, in
writing, to any borrower whose liability remained unpaid, can call
upon him to discharge in full such liabilities within 60 days. Even
after receipt of such a notice delivered under sub-section (2) of
Section 13, if the borrower does not honour the commitment by
discharging in full the liability and thus fails to do so, sub-section
(4) empowered the secured creditor to take recourse to one or the
other of the measures provided there under to recover his secured
debt. Clause (a) thereof specified that the secured creditor may
take possession of the secured asset of the borrower including
right to transfer by way of lease, assignment or sale for realizing
the secured asset. Thus, a secured creditor has been vested with a
special power to take possession of the secured asset of the
borrower and also liquidate it by way of sale for realizing the debt,
but however, if a secured creditor, entirely on his own, attempts to
take possession of any such secured asset, he might encounter
with resistance and sometimes it can also lead to unpleasant
situations, inasmuch as the actions of secured creditor can be
misunderstood as lacking any legal sanction and authority.
Therefore, with a view to address this area of concern, in Section
14, a separate mechanism has been contemplated and provided
for. Sub-section (1) of Section 14 empowers that the secured
creditor, who seeks to take possession of any secured asset, may,
for the purpose of taking possession or control of any such secured
asset, request, in writing, the Chief Metropolitan Magistrate or the
District Magistrate within whose jurisdiction any such secured
asset may be situated, to take possession thereof. Whenever any
such application is received by the Chief Metropolitan Magistrate
or the District Magistrate, he is required to take possession of such
asset and then forward such asset to the secured creditor. Thus,
wherever possession of a secured asset is sought to be taken by
the secured creditor, he is entitled to approach, in writing, the
Chief Metropolitan Magistrate or the District Magistrate in whose
jurisdiction the secured asset was lying.
In the instant case, the Chief Metropolitan Magistrate of
Ranga Reddy District is the appropriate and competent authority
to be approached by the bank, inasmuch as the secured asset in
question was lying within the jurisdiction of the said Court.
Hence, the bank appears to have approached the Chief
Metropolitan Magistrate, Ranga Reddy District at L.B. Nagar and
accordingly, the learned Chief Metropolitan Magistrate entertained
Crl.M.P.No. 654 of 2015 and appointed the 3rd respondent
Advocate as Commissioner and entrusted the said Commissioner
with the task of executing the warrant for taking possession of the
scheduled property. The schedule of property, which is drawn by
the learned Chief Metropolitan Magistrate and entrusted for the
purpose of taking possession of the property, is described as
under:
Schedule of Property
All that piece and parcel of land admeasuring acres 1.03
guntas in Sy.No. 51/EE situated at Alwal Village, Malkajgiri
Mandal, Ranga Reddy District and bounded by:
North : Neighbors Land
South : Road
East : Neighbors Land
West : Neighbors Land
This schedule is exactly tallying with that contained in
Annexure-I to the mortgage created by the petitioner on
18.02.2009 in favour of the bank excepting to the following extent:
together with all structures thereon and all the things
attached to the earth or permanently fastened to anything
attached to the earth
The Chief Metropolitan Magistrate, in our considered opinion, has
not committed any error in exercise of power and jurisdiction in
rendering the necessary assistance under sub-section (1) of
Section 14 to the secured creditor, namely the bank, for taking
possession of the mortgaged property and then, entrusting the
warrant for execution to the 3rd respondent. The provision
contained under sub-section (1) of Section 14 clearly comprises of
two different steps; the first step which is liable to be undertaken
by the learned Chief Metropolitan Magistrate is to secure the
possession of the secured asset. Then, the second step is to make
over the possession of the secured asset to the secured creditor.
For achieving the said objective, a Commissioner can be appointed.
The Commissioner, in fact, discharges the functions of the Court
itself, but however, he does it on its behalf as the Court itself need
not travel to the place where the secured asset was lying. For this
purpose, a warrant is liable to be drawn and issued, so that the
Commissioner can demonstrate his lawful authority to take
possession of the secured asset. By holding such a lawful
authority, the Commissioner can also neutralize effectively any
resistance, which can be offered in execution of the warrant
entrusted by the Chief Metropolitan Magistrate or the District
Magistrate, as the case may be. The warrant has got to be
returned to the Court by way of submission of a report. For this
purpose, the learned Chief Metropolitan Magistrate, in the instant
case, directed the Commissioner to execute the warrant and return
it along with the inventory list on or before 26.10.2015, when he
passed the order in Crl.M.P.No. 654 of 2015 on 09.10.2015. By a
separate order, dated 04.11.2015, the learned Magistrate extended
the said time limit up to 29.12.2015. Accordingly, the Advocate-
Commissioner appears to have taken possession of the secured
asset on 26.11.2015. A necessary report in that regard was drawn
by the learned Advocate-Commissioner on 01.12.2015 and filed it
before the learned Chief Metropolitan Magistrate.
The grievance of the petitioner is that the Advocate-
Commissioner, instead of strictly proceeding in terms of and in
accordance with the warrant entrusted by the learned Chief
Metropolitan Magistrate, has travelled beyond the scope of the said
warrant and took possession of the house property of the petitioner
bearing D.No. 1-5-230 situated in Survey No. 51/AA, Alwal Village,
Malkajgiri Mandal, Ranga Reddy District. It is in that context and
backdrop, the present Writ Petition with the prayers as noticed by
us has been instituted.
Heard Sri K. Gopal Krishna Murthy, learned counsel for the
petitioner and Sri Mujeeb, learned counsel representing the 3rd
respondent Advocate-Commissioner. None appears for the
respondent bank.
Sri Gopal Krishna Murthy, learned counsel for the petitioner
would principally contend that the provisions of the SARFAESI Act
could not have been invoked by the respondent bank, at the first
instance, inasmuch as the secured asset is an agricultural land
and hence, it is exempted from being proceeded against.
Therefore, there was a fundamental error of jurisdiction committed
in invoking Section 14 of the Act and consequently, the exercise of
jurisdiction by the learned Chief Metropolitan Magistrate also lacks
the necessary authority and sanction of law. In support of this
contention, the learned counsel has drawn our pointed attention to
Section 31 of the SARFAESI Act, which clearly spelt out that the
provisions of the Act shall not apply to, amongst others, any
security interest created in agricultural land. Therefore, the first
and the foremost question, which we are now called upon to
decide, is whether the security interest created in the instant case
is the one created in agricultural land or merely in land.
We have already noticed that the petitioner is the one, who
has created the security interest in land comprising of Ac.1.03
guntas in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal,
Ranga Reddy District by creating a mortgage and also by
depositing the title deed thereof. There is no dispute on this score.
Annexure-I to the mortgage deed dated 18.02.2009 executed and
signed by the petitioner herein, inter alia, describes, in detail, the
security interest so created. The very opening words contained
therein hold the key to the present question when they described
as under:
All that piece and parcel of land admeasuring Acre
1.03 guntas in Sy.No. 51/EE situated at Alwal Village,
Malkajgiri Mandal, Ranga Reddy District in the State of
Andhra Pradesh bounded as ..
This document has clearly described the secured asset as land
admeasuring Acre.1.03 guntas but not specified it as agricultural
land admeasuring Ac.1.03 guntas. Nowhere, the land was
described as agricultural land. This apart, immediately after the
description of the extent of land, the following expressions are used
in Annexure-I of the mortgage deed:
together with all structures thereon and all the things
attached to the earth.. (Emphasis is placed now)
Therefore, the petitioner, while creating a security interest by way
of creating a mortgage in favour of the bank, has himself gone on
record that there are structures standing on this land of Ac.1.03
guntas lying in Survey No. 51/EE of Alwal Village and by his not
describing the said land as agricultural land, he cannot now be
permitted to turn round and contend to the contra that he has
created security interest in agricultural land in contrast to mere
land.
This apart, the learned counsel for the petitioner, in support
of his plea that the land in question is agricultural land, but not
non-agricultural land, pressed into service the revenue record in
the form of Pahanis and other documents obtained for the relevant
years. It is true that the Pahanis and other village account has
clearly brought out that the petitioner possesses land to the extent
of Ac.1.03 guntas situated in Survey No. 51/EE, Alwal Village and
also he possesses Ac.0.15 guntas of land in Survey No. 51/AA of
the same village. When we look at the provisions of the Andhra
Pradesh Rights in Land and Pattadar Passbooks Act, 1971, it
emerges that the expression land which is defined in sub-section
(4) of Section 2 of that enactment, brings out that land means land
which is used or is capable of being used for the purpose of
agriculture, including horticulture, but does not include land used
exclusively for non-agricultural purposes. Thus, if the land is also
capable of being used for agricultural purposes, but not
necessarily being used for agricultural purposes as such, it also
answers the description of the expression land found mentioned
in the said Act. Therefore, the record is prepared under Section 3
of the said enactment of every land, which is merely capable of
being used for agricultural or horticulture purposes, but not
necessarily being used as it is for the said purpose. Therefore, we
have no difficulty to reject the contention of the learned counsel for
the petitioner that since revenue record maintained under the
aforementioned 1971 Act has been produced by him, it has to be
invariably inferred that the security interest created by the
petitioner in favour of the bank is relating to agricultural land and
hence, the provisions contained under Section 31 of the SARFAESI
Act should come to his rescue. Only when a security interest is
specifically created describing the security interest as agricultural
land, then alone, the benefit of Section 31 of the SARFAESI Act will
enure to such creator of interest, but not otherwise. This apart, as
we have already noted supra, sub-section (1) of Section 14 of the
SARFAESI Act has contained two separate limbs; one is taking
possession of the secured asset and the next step is making over
the said asset to the secured creditor.
At the stage of making over the possession of the secured
interest to the secured creditor, any person, whose interests are
adversely impacted in the process of taking possession by the Chief
Metropolitan Magistrate or the District Magistrate, as the case may
be, acting on its own or acting though a Commissioner appointed
for the said purpose, is entitled to file his objections for recording
the fact of taking possession of the land (secured asset). When any
such memorandum of objections has been drawn and presented
before the Chief Metropolitan Magistrate or the District Magistrate,
as the case may be, the said Court is bound to consider the same
and pass an appropriate order. In the instant case, no such
memorandum of objections has been drawn by the petitioner or
filed before the Chief Metropolitan Magistrate. Therefore, the
statement made by the Advocate-Commissioner in her affidavit
filed before us, clearly brings out, in paragraph 3, that she has
identified the scheduled property and executed the warrant and
further went on to assert that the petitioner, his servants, his wife
and several others stated that the house bearing D.No. 1-5-230
situated in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal,
Ranga Reddy District belongs to the petitioner herein. We have to
go by her statement of fact that the said house bearing D.No.
1-5-230 is, in fact, lying in Survey No. 51/EE, but not in Survey
No. 51/AA. This apart, the learned Advocate-Commissioner has
also recorded, in paragraph 3 of her affidavit, that the petitioner
never filed any work order (memo) before her requiring her to
execute the warrant by any method specified in the work memo.
In the absence of any such material to the contra, the conduct of
the Advocate-Commissioner in taking possession of the building
bearing D.No. 1-5-230 cannot be objected to or found fault with.
Even otherwise, there is no credible material that was placed
on record of this Court to show that the house bearing
D.No. 1-5-230 is actually lying in Survey No. 51/AA, but is not
lying in Survey No. 51/EE of Alwal Village. The fact that the house
property has been assessed to property tax by the local
municipality/corporation, does not necessarily reflect that the said
house property is lying in Survey No. 51/AA, but not in Survey No.
51/EE. As was already noticed supra, the revenue record filed by
the petitioner itself has brought out that he has land of an extent
of Ac.1.03 guntas lying in Survey No. 51/EE and land of an extent
of Ac.0.15 guntas lying in Survey No. 51/AA. In which parcel of
these two extents of land did the petitioner construct the house
bearing D.No. 1-5-230 is a matter left for guessing by us. In the
absence of any credible material, we will not be justified in
returning a finding of fact that house bearing D.No. 1-5-230 was,
in fact, lying in Survey No. 51/AA, but not in Survey No. 51/EE.
Even otherwise, that being a controversy of fact, which can only be
determined upon collection of evidence, both oral and
documentary, in exercise of jurisdiction under Article 226 of the
Constitution, seldom such collection of evidence is resorted to, in
that, this Court is not forbidden from collecting any such evidence,
but was not indulged in routinely.
For the aforesaid reasons, we are not in a position to accede
to the request made by the petitioner and consequently, we
dismiss this Writ Petition, but however, without costs, leaving it to
the petitioner to work out his remedies in accordance with law.
Consequently, the miscellaneous applications, if any shall
also stand dismissed.
-----------------------------------------
NOOTY RAMAMOHANA RAO, J
----------------------------------------
DR. B. SIVA SANKARA RAO, J
16th February 2016
WRIT PETITION No. 41006 OF 2015
16-02-2016
Sri C. Malla Reddy ....Petitioner
The Authorized Officer, IDBI Bank Limited, Hyderabad & others..Respondents
Counsel for the Petitioner:Sri K. Gopala Krishna Murthy
Counsel for Respondent No.3:Sri M.A. Mujeeb
<GIST:
>HEAD NOTE:
? Cases referred
THE HONBLE SRI JUSTICE NOOTY RAMAMOHANA RAO
AND
THE HONBLE DR. JUSTICE B. SIVA SANKARA RAO
WRIT PETITION No. 41006 OF 2015
O R D E R: (per Honble Sri Justice Nooty Ramamohana Rao)
This Petition under Article 226 of the Constitution of India
seeks a writ of mandamus for declaring the action of Respondents
1 and 2 in taking possession of the residential house bearing D.No.
1-5-230 situated in Survey No. 51/AA, Alwal Village, Malkajgiri
Mandal, Ranga Reddy District, as arbitrary, illegal and
unconstitutional and hence, to direct Respondents 1 and 2
together with the 3rd respondent Advocate-Commissioner
appointed in Crl.M.P.No. 654 of 2015 on the file of the Chief
Metropolitan Magistrate, Ranga Reddy District at L.B.Nagar to
forthwith restore the possession of the house property described
supra to the petitioner and also to quash the proceedings initiated
by Respondents 1 and 2 under the Securitization and
Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 against the agricultural properties in Survey No.
51/EE, Alwal Village, Malkajgiri Mandal, Ranga Reddy District and
also to order for stay of all further proceedings initiated by
Respondents 1 and 2 under the provisions of the aforementioned
Act.
The 4th respondent is stated to be a public limited company
carrying on business in software tracking including development of
required embedded software and mobile shopping software and
that it has availed certain financial assistance from the Industrial
Development Bank of India, whose Deputy General Manager is
impleaded as the 2nd respondent herein. The financial benefits
availed comprised of two components; 1) a term loan limited to
Rs.4 crores; and 2) a cash credit loan limited to Rs.3.70 crores in
the year 2009. The writ petitioner, in paragraph 6 of the affidavit
filed in support of this Writ Petition, would describe himself as a
nominal participant in the business of the said company and since
the bank has insisted, the petitioner has created an equitable
mortgage and secured the loan advanced to the 4th respondent
company. It is his specific case that he is an innocent 3rd party and
that he has been induced by the 4th respondent into creating the
security for the loan availed by it. It is not in dispute that a
mortgage has been created by depositing the title deeds on
18.02.2009 for the land of an extent of Ac.1.03 guntas situated in
Survey No. 51/EE of Alwal Village, Malkajgiri Mandal, Ranga
Reddy District.
Annexure-I to the deed of mortgage dealt with the security
created by the petitioner herein and it reads as under:
It is not in dispute that the credit facilities availed by the 4th
respondent company have remained un-liquidated and
consequently, the bank has declared the debt as a non-performing
asset.
The Parliament, with a view to regulate securitization and
reconstruction of financial assets and enforcement of security
interest and for matters connected therewith and incidental
thereto, enacted The Securitization and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(henceforth, for brevity referred to as the SARFAESI Act). The
expression bank has been defined in Section 2(c) which includes a
banking company or the State Bank of India or any subsidiary
bank or a multi-state co-operative bank or such other bank which
the Central Government may, by notification, specify for the
purposes of this Act. It is hardly in doubt that the bank in the
instant case answers this description as per the definition
contained in Section 2(c) of the Act. Section 2(f) defined the
expression borrower in the following terms:
borrower means any person who has been granted
financial assistance by any bank or financial institution or
who has given any guarantee or created any mortgage or
pledge as security for the financial assistance granted by any
bank or financial institution and include a person who
becomes borrower of a securitization company or
reconstruction company consequent upon acquisition by it of
any rights or interest of any bank or financial institution in
relation to such financial assistance.
Thus, going by the above said definition, whoever has given any
guarantee or created any mortgage or pledge as a security for the
financial assistance granted by any bank or financial institution to
another person also becomes a borrower. As was noticed by us
supra, the petitioner herein has created mortgage by depositing the
title deed for the land comprising of Ac.1.03 guntas lying in Survey
No. 51/EE of Alwal Village. Hence, he is liable to be treated as a
borrower of the bank.
The expression debt has been defined in Section 2(ha) to
carry the same meaning assigned to it in clause (g) of Section 2 of
the Recovery of Debts Due to Banks and Financial Institutions Act,
1993. In that enactment, the said expression has been defined as
under:
debt means any liability (inclusive of interest) which is claimed
as due from any person by a bank or a financial institution or by a
consortium of banks or financial institutions during the course of
any business activity undertaken by the bank or the financial
institution or the consortium under any law for the time being in
force, in cash or otherwise, whether secured or unsecured, or
assigned, or whether payable under a decree or order of any civil
court or any arbitration award or otherwise or under a mortgage and
subsisting on, and legally recoverable on, the date of the application.
From the above definition, there is hardly any doubt that there
exists a debt between the bank and the principal borrower, the 4th
respondent company.
The expression default has been defined in Section 2(j) as
meaning non-payment of any principal debt or interest thereon
or any other amount payable by a borrower to any secured creditor
consequent upon which the account of such borrower is classified
as non-performing asset in the books of account of the secured
creditor. Therefore, the failure to liquidate the outstanding liability
by the 4th respondent principal borrower amounted to committing
a default.
The expression financial asset has been defined in Section
2(l) in the following words:
financial asset means debt or receivables and includes
i) a claim to any debt or receivables or part thereof, whether
secured or unsecured; or
ii) any debt or receivables secured by, mortgage of, or charge on,
immovable property; or
iii) a mortgage, charge, hypothecation or pledge of movable
property; or
iv) any right or interest in the security, whether full or part
underlying such debt or receivables; or
v) any beneficial interest in property, whether movable or
immovable, or in such debt, receivables, whether such interest is
existing, future, accruing, conditional or contingent; or
vi) any financial assistance.
Thus, any debt or receivables secured by mortgage of or charge on
immovable property amounts to a financial asset.
The expression non-performing asset is defined in section
2(o) as under:
non-performing asset means an asset or account of a borrower,
which has been classified by a bank or financial institution as
substandard, doubtful or loss asset----
(a) in case such bank or financial institution is administered or
regulated by any authority or body established, constituted or
appointed by any law for the time being in force, in accordance with
the directions or guidelines relating to assets classifications issued
by such authority or body;
(b) in any other case, in accordance with the directions or guidelines
relating to assets classifications issued by the Reserve Bank.
While the expression property is defined in Section 2(t) as under:
property means
(i) immovable property;
(ii) movable property;
(iii) any debt or any right to receive payment of money, whether secured
or unsecured;
(iv) receivables, whether existing or future;
(v) intangible assets, being know-how, patent, copyright, trade mark,
licence, franchise or any other business or commercial right of
similar nature.
Section 13 is included in Chapter - III of the SARFAESI Act,
which dealt with Enforcement of Security Interest. Section 13
would set out that any security interest created in favour of any
secured creditor may be enforced, without the intervention of court
or tribunal, by such creditor in accordance with the provisions of
this Act. Thus, the SARFAESI Act is a special piece of legislation
made by the Parliament for achieving a special objective of
securing the enforcement of the security interest of the secured
creditor. That is the reason why a special provision is created in
sub-section (1) of Section 13 of the SARFAESI Act by making it
clear that the security interest created in favour of any secured
creditor can be got enforced without the intervention of the Court.
The intention of the Parliament is so very clear that it wanted to
address the malady of the defaults committed by the borrowers in
repayment of the debt due by them, resulting in getting into the
very vitals of the secured creditors and more particularly financial
institutions including those in the banking sector. Under
sub-section (2), the secured creditor, by delivering a notice, in
writing, to any borrower whose liability remained unpaid, can call
upon him to discharge in full such liabilities within 60 days. Even
after receipt of such a notice delivered under sub-section (2) of
Section 13, if the borrower does not honour the commitment by
discharging in full the liability and thus fails to do so, sub-section
(4) empowered the secured creditor to take recourse to one or the
other of the measures provided there under to recover his secured
debt. Clause (a) thereof specified that the secured creditor may
take possession of the secured asset of the borrower including
right to transfer by way of lease, assignment or sale for realizing
the secured asset. Thus, a secured creditor has been vested with a
special power to take possession of the secured asset of the
borrower and also liquidate it by way of sale for realizing the debt,
but however, if a secured creditor, entirely on his own, attempts to
take possession of any such secured asset, he might encounter
with resistance and sometimes it can also lead to unpleasant
situations, inasmuch as the actions of secured creditor can be
misunderstood as lacking any legal sanction and authority.
Therefore, with a view to address this area of concern, in Section
14, a separate mechanism has been contemplated and provided
for. Sub-section (1) of Section 14 empowers that the secured
creditor, who seeks to take possession of any secured asset, may,
for the purpose of taking possession or control of any such secured
asset, request, in writing, the Chief Metropolitan Magistrate or the
District Magistrate within whose jurisdiction any such secured
asset may be situated, to take possession thereof. Whenever any
such application is received by the Chief Metropolitan Magistrate
or the District Magistrate, he is required to take possession of such
asset and then forward such asset to the secured creditor. Thus,
wherever possession of a secured asset is sought to be taken by
the secured creditor, he is entitled to approach, in writing, the
Chief Metropolitan Magistrate or the District Magistrate in whose
jurisdiction the secured asset was lying.
In the instant case, the Chief Metropolitan Magistrate of
Ranga Reddy District is the appropriate and competent authority
to be approached by the bank, inasmuch as the secured asset in
question was lying within the jurisdiction of the said Court.
Hence, the bank appears to have approached the Chief
Metropolitan Magistrate, Ranga Reddy District at L.B. Nagar and
accordingly, the learned Chief Metropolitan Magistrate entertained
Crl.M.P.No. 654 of 2015 and appointed the 3rd respondent
Advocate as Commissioner and entrusted the said Commissioner
with the task of executing the warrant for taking possession of the
scheduled property. The schedule of property, which is drawn by
the learned Chief Metropolitan Magistrate and entrusted for the
purpose of taking possession of the property, is described as
under:
Schedule of Property
All that piece and parcel of land admeasuring acres 1.03
guntas in Sy.No. 51/EE situated at Alwal Village, Malkajgiri
Mandal, Ranga Reddy District and bounded by:
North : Neighbors Land
South : Road
East : Neighbors Land
West : Neighbors Land
This schedule is exactly tallying with that contained in
Annexure-I to the mortgage created by the petitioner on
18.02.2009 in favour of the bank excepting to the following extent:
together with all structures thereon and all the things
attached to the earth or permanently fastened to anything
attached to the earth
The Chief Metropolitan Magistrate, in our considered opinion, has
not committed any error in exercise of power and jurisdiction in
rendering the necessary assistance under sub-section (1) of
Section 14 to the secured creditor, namely the bank, for taking
possession of the mortgaged property and then, entrusting the
warrant for execution to the 3rd respondent. The provision
contained under sub-section (1) of Section 14 clearly comprises of
two different steps; the first step which is liable to be undertaken
by the learned Chief Metropolitan Magistrate is to secure the
possession of the secured asset. Then, the second step is to make
over the possession of the secured asset to the secured creditor.
For achieving the said objective, a Commissioner can be appointed.
The Commissioner, in fact, discharges the functions of the Court
itself, but however, he does it on its behalf as the Court itself need
not travel to the place where the secured asset was lying. For this
purpose, a warrant is liable to be drawn and issued, so that the
Commissioner can demonstrate his lawful authority to take
possession of the secured asset. By holding such a lawful
authority, the Commissioner can also neutralize effectively any
resistance, which can be offered in execution of the warrant
entrusted by the Chief Metropolitan Magistrate or the District
Magistrate, as the case may be. The warrant has got to be
returned to the Court by way of submission of a report. For this
purpose, the learned Chief Metropolitan Magistrate, in the instant
case, directed the Commissioner to execute the warrant and return
it along with the inventory list on or before 26.10.2015, when he
passed the order in Crl.M.P.No. 654 of 2015 on 09.10.2015. By a
separate order, dated 04.11.2015, the learned Magistrate extended
the said time limit up to 29.12.2015. Accordingly, the Advocate-
Commissioner appears to have taken possession of the secured
asset on 26.11.2015. A necessary report in that regard was drawn
by the learned Advocate-Commissioner on 01.12.2015 and filed it
before the learned Chief Metropolitan Magistrate.
The grievance of the petitioner is that the Advocate-
Commissioner, instead of strictly proceeding in terms of and in
accordance with the warrant entrusted by the learned Chief
Metropolitan Magistrate, has travelled beyond the scope of the said
warrant and took possession of the house property of the petitioner
bearing D.No. 1-5-230 situated in Survey No. 51/AA, Alwal Village,
Malkajgiri Mandal, Ranga Reddy District. It is in that context and
backdrop, the present Writ Petition with the prayers as noticed by
us has been instituted.
Heard Sri K. Gopal Krishna Murthy, learned counsel for the
petitioner and Sri Mujeeb, learned counsel representing the 3rd
respondent Advocate-Commissioner. None appears for the
respondent bank.
Sri Gopal Krishna Murthy, learned counsel for the petitioner
would principally contend that the provisions of the SARFAESI Act
could not have been invoked by the respondent bank, at the first
instance, inasmuch as the secured asset is an agricultural land
and hence, it is exempted from being proceeded against.
Therefore, there was a fundamental error of jurisdiction committed
in invoking Section 14 of the Act and consequently, the exercise of
jurisdiction by the learned Chief Metropolitan Magistrate also lacks
the necessary authority and sanction of law. In support of this
contention, the learned counsel has drawn our pointed attention to
Section 31 of the SARFAESI Act, which clearly spelt out that the
provisions of the Act shall not apply to, amongst others, any
security interest created in agricultural land. Therefore, the first
and the foremost question, which we are now called upon to
decide, is whether the security interest created in the instant case
is the one created in agricultural land or merely in land.
We have already noticed that the petitioner is the one, who
has created the security interest in land comprising of Ac.1.03
guntas in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal,
Ranga Reddy District by creating a mortgage and also by
depositing the title deed thereof. There is no dispute on this score.
Annexure-I to the mortgage deed dated 18.02.2009 executed and
signed by the petitioner herein, inter alia, describes, in detail, the
security interest so created. The very opening words contained
therein hold the key to the present question when they described
as under:
All that piece and parcel of land admeasuring Acre
1.03 guntas in Sy.No. 51/EE situated at Alwal Village,
Malkajgiri Mandal, Ranga Reddy District in the State of
Andhra Pradesh bounded as ..
This document has clearly described the secured asset as land
admeasuring Acre.1.03 guntas but not specified it as agricultural
land admeasuring Ac.1.03 guntas. Nowhere, the land was
described as agricultural land. This apart, immediately after the
description of the extent of land, the following expressions are used
in Annexure-I of the mortgage deed:
together with all structures thereon and all the things
attached to the earth.. (Emphasis is placed now)
Therefore, the petitioner, while creating a security interest by way
of creating a mortgage in favour of the bank, has himself gone on
record that there are structures standing on this land of Ac.1.03
guntas lying in Survey No. 51/EE of Alwal Village and by his not
describing the said land as agricultural land, he cannot now be
permitted to turn round and contend to the contra that he has
created security interest in agricultural land in contrast to mere
land.
This apart, the learned counsel for the petitioner, in support
of his plea that the land in question is agricultural land, but not
non-agricultural land, pressed into service the revenue record in
the form of Pahanis and other documents obtained for the relevant
years. It is true that the Pahanis and other village account has
clearly brought out that the petitioner possesses land to the extent
of Ac.1.03 guntas situated in Survey No. 51/EE, Alwal Village and
also he possesses Ac.0.15 guntas of land in Survey No. 51/AA of
the same village. When we look at the provisions of the Andhra
Pradesh Rights in Land and Pattadar Passbooks Act, 1971, it
emerges that the expression land which is defined in sub-section
(4) of Section 2 of that enactment, brings out that land means land
which is used or is capable of being used for the purpose of
agriculture, including horticulture, but does not include land used
exclusively for non-agricultural purposes. Thus, if the land is also
capable of being used for agricultural purposes, but not
necessarily being used for agricultural purposes as such, it also
answers the description of the expression land found mentioned
in the said Act. Therefore, the record is prepared under Section 3
of the said enactment of every land, which is merely capable of
being used for agricultural or horticulture purposes, but not
necessarily being used as it is for the said purpose. Therefore, we
have no difficulty to reject the contention of the learned counsel for
the petitioner that since revenue record maintained under the
aforementioned 1971 Act has been produced by him, it has to be
invariably inferred that the security interest created by the
petitioner in favour of the bank is relating to agricultural land and
hence, the provisions contained under Section 31 of the SARFAESI
Act should come to his rescue. Only when a security interest is
specifically created describing the security interest as agricultural
land, then alone, the benefit of Section 31 of the SARFAESI Act will
enure to such creator of interest, but not otherwise. This apart, as
we have already noted supra, sub-section (1) of Section 14 of the
SARFAESI Act has contained two separate limbs; one is taking
possession of the secured asset and the next step is making over
the said asset to the secured creditor.
At the stage of making over the possession of the secured
interest to the secured creditor, any person, whose interests are
adversely impacted in the process of taking possession by the Chief
Metropolitan Magistrate or the District Magistrate, as the case may
be, acting on its own or acting though a Commissioner appointed
for the said purpose, is entitled to file his objections for recording
the fact of taking possession of the land (secured asset). When any
such memorandum of objections has been drawn and presented
before the Chief Metropolitan Magistrate or the District Magistrate,
as the case may be, the said Court is bound to consider the same
and pass an appropriate order. In the instant case, no such
memorandum of objections has been drawn by the petitioner or
filed before the Chief Metropolitan Magistrate. Therefore, the
statement made by the Advocate-Commissioner in her affidavit
filed before us, clearly brings out, in paragraph 3, that she has
identified the scheduled property and executed the warrant and
further went on to assert that the petitioner, his servants, his wife
and several others stated that the house bearing D.No. 1-5-230
situated in Survey No. 51/EE of Alwal Village, Malkajgiri Mandal,
Ranga Reddy District belongs to the petitioner herein. We have to
go by her statement of fact that the said house bearing D.No.
1-5-230 is, in fact, lying in Survey No. 51/EE, but not in Survey
No. 51/AA. This apart, the learned Advocate-Commissioner has
also recorded, in paragraph 3 of her affidavit, that the petitioner
never filed any work order (memo) before her requiring her to
execute the warrant by any method specified in the work memo.
In the absence of any such material to the contra, the conduct of
the Advocate-Commissioner in taking possession of the building
bearing D.No. 1-5-230 cannot be objected to or found fault with.
Even otherwise, there is no credible material that was placed
on record of this Court to show that the house bearing
D.No. 1-5-230 is actually lying in Survey No. 51/AA, but is not
lying in Survey No. 51/EE of Alwal Village. The fact that the house
property has been assessed to property tax by the local
municipality/corporation, does not necessarily reflect that the said
house property is lying in Survey No. 51/AA, but not in Survey No.
51/EE. As was already noticed supra, the revenue record filed by
the petitioner itself has brought out that he has land of an extent
of Ac.1.03 guntas lying in Survey No. 51/EE and land of an extent
of Ac.0.15 guntas lying in Survey No. 51/AA. In which parcel of
these two extents of land did the petitioner construct the house
bearing D.No. 1-5-230 is a matter left for guessing by us. In the
absence of any credible material, we will not be justified in
returning a finding of fact that house bearing D.No. 1-5-230 was,
in fact, lying in Survey No. 51/AA, but not in Survey No. 51/EE.
Even otherwise, that being a controversy of fact, which can only be
determined upon collection of evidence, both oral and
documentary, in exercise of jurisdiction under Article 226 of the
Constitution, seldom such collection of evidence is resorted to, in
that, this Court is not forbidden from collecting any such evidence,
but was not indulged in routinely.
For the aforesaid reasons, we are not in a position to accede
to the request made by the petitioner and consequently, we
dismiss this Writ Petition, but however, without costs, leaving it to
the petitioner to work out his remedies in accordance with law.
Consequently, the miscellaneous applications, if any shall
also stand dismissed.
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NOOTY RAMAMOHANA RAO, J
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DR. B. SIVA SANKARA RAO, J
16th February 2016
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