Dewan Housing Finance Corporation Ltd. v. Abdul Rasak and Aneesa Abdul Rahiman

**“CR”** **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU** **MONDAY ,THE 24TH DAY OF SEPTEMBER 2018 / 2ND ASWINA, 1940 WP(C).No. 29763 of 2018** ## **PETITIONER/S:** **M/S. DEWAN HOUSING FINANCE CORPORATION LTD COMPANY INCORPORATED UNDER THE COMPANIES ACT 1956, HAVING ITS REGISTERED OFFICE AT WARDEN HOUSE 2ND FLOOR, SIR P.M ROAD, FORT MUMBAI 400001 AND A BRANCH OFFICE AT DEWAN HOUSING FINANCE CORPORATION LTD 1ST FLOOR K.M.M BUILDING DOOR NO 32/2383-B AND D1 PALARIVATTOM, KOCHI 682025, REPRESENTED ITS AUTHORISED OFFICER AND REGIONAL LEGAL MANAGER MR.RAKESH DAWNY KOKKATTU** **BY ADVS. SAJI MATHEW SRI.DENU JOSEPH SMT.NEETHU REGHUKUMAR** ## **RESPONDENT/S:** **1 ABDUL RASAK AGED 41 YEARS S/O PAKEDEERI ABDUL RAHMAN,PAKEDEERI HOUSE, TUVVUR P.O, TUVVUR VILLAGE DESOM, NILAMBUR TALUK, MALAPPURAM 679327** **2 SMT. ANEESA ABDUL RAHIMAN AGED 34, W/O. ABDUL RASAJM, PIN-671554 PAKEDEERI HOUSE, TUVVUR P.O, TUVVUR VILLAGE DESOM, NILAMBUR TALUK, MALAPPURAM 679327** **BY ADV. SRI.ALEX.M.SCARIA** -2- W.P.(C). No. 29763 of 2018 **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24.09.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** ## **JUDGMENT** The petitioner, a Finance Corporation, is the creditor; the respondents 1 and 2 are the debtors. On the respondents’ default, the petitioner Corporation initiated recovery proceedings under the SARFAESI Act. It first issued a notice under Section 13(2) of the Act. Later, it invoked Section 14 before the Chief Judicial Magistrate (CJM), Manjeri, Malappuram District. On 20[th] July 2018, the CJM directed notice to the respondent borrowers through registered post with acknowledgement due. 2. The notice was ordered despite the petitioner's counsel insisting that the statute does not mandate notice to the debtors. On 20[th] July 2018, the matter was further adjourned to 29[th] September 2018. Initially, the petitioner tried to get a certified copy of the docket instructions ordering notice. It alleges that the CJM did not permit it to have a copy of the docket order. Then, aggrieved, the petitioner has filed this writ petition. -3- W.P.(C). No. 29763 of 2018 3. In the above factual backdrop, Sri Saji Mathew, the petitioner's counsel, has contended that this Court has, time and time again, asserted that under Section 14, the CJM discharges no judicial functions. He has further submitted that the CJM, primarily, must satisfy himself from the creditor’s affidavit that it has fulfilled the statutory requirements under Section 14 of the Act. Then, he has no other option, Sri Mathew stresses, than appointing an Advocate Commissioner to take possession of the secured asset, for the creditor. 4. What the CJM discharges, according to Sri Mathew, is an administrative function, rather than a judicial one. To support his contentions, he has relied on _C.R.Sindhu v. State of Kerala[1]_ , _Roshan Narayanan C.S. v. Authorized Officer, Central Bank of India[2]_ and _Standard Chartered Bank v. V. Noble Kumar[3]_ . Eventually, the learned counsel has also drawn my attention to the _Housing Development Finance_ . _Corporation Ltd. v. Government of Kerala[4]_ 5. On the other hand, Sri Alex M. Scaria, the respondents’ > 1 [2007 (4) KHC 944] 2 [2017(3) KHC 617] 3 [2013 (9) SCC 620] > 4 [2013 (3) KHC 85] -4- W.P.(C). No. 29763 of 2018 counsel, submits that the legal position is not in dispute. According to him, Section 14 may require no notice to the debtors. Yet it does not constrict the CJM’s power to put the debtors on notice if the officer reckons it desirable. But he pleads that the borrowers will clear the overdue amounts in a few instalments. 6. In reply, Sri Saji Mathew insists that there ought to be a pronouncement on the repeated adjournments the learned CJM has indulged in. He stresses that the officer cannot undermine the statutory sanctity of a provision, in the name of the elusive spirit of law. Yet he submits that if the respondents approach the bank and apply for instalments, the Corporation is not averse to considering their request. It may accommodate them, subject to certain conditions, though. 7. Heard the learned counsel appearing for the petitioner and the learned counsel appearing for the respondents. 8. Our country, like any other, competes in the international arena to attract foreign investment. In banking parlance, the Credit Information Report summarises an individual’s credit-worthiness. -5- W.P.(C). No. 29763 of 2018 CIBIL is one such Credit Bureau, licensed by the RBI under the Credit Information Companies (Regulation) Act of 2005. In fact, after collecting the financial data, CIBIL provides credit score of the borrowers. And this credit score plays a pivotal role in the loan and credit card approvals. 9. Similarly, internationally, **“** Ease of Doing Business” is an index published by the World Bank. It is an aggregate figure combining different parameters which define the ease of doing business in a country. For determining a country’s rank in the index, the World Bank aggregates information from 10 areas of business regulation: (1) Starting a Business; (2) Dealing with Construction Permits; (3) Getting Electricity; (4) Registering Property; (5) Getting Credit; (6) Protecting Minority Investors; (7) Paying Taxes; (8) Trading across Borders; (9) Enforcing Contracts; and (10) Resolving Insolvency. 10. Of the 190 countries, India had the dubious rank of 100 in 2017. It lagged behind countries like Pakistan and Nigeria in enforcing contracts; that is, in resolving the contractual disputes -6- W.P.(C). No. 29763 of 2018 through judicial process. But, thanks to the country’s concerted efforts—both administrative and legislative—now in 2018 India has jumped 23 positions. It stands at 77. If a country desires to invest in another country, it goes by the Ease of Doing Business Index. And, of all the parameters, how a country’s judicial dispensation deals with contractual disputes assumes importance. 11. As seen, some of the enactments that have aimed at lifting India’s rank in the international index are these: the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the SARFAESI Act, the Commercial Courts, Commercial Division & Commercial Division & Commercial Appellate Division of High Courts Act, 2015, and the Fugitive Economic Offenders Act, 2018. 12. So we need to examine the SARFAESI Act in the backdrop of the International Ease of Doing Business and expedient resolution of commercial, particularly contractual, disputes—commercial ones, at that. 13. In _Catholic Syrian Bank Ltd. vs. Orma Marble World[5] ,_ this Court has acknowledged that even when a statute does not, in so many > 5 Judgment dated 12[th] July 2018 in WPC No.23234 of 2018 -7- W.P.(C). No. 29763 of 2018 words, compel an authority to put an aggrieved or affected person on notice, the Courts need to expansively interpret the doctrine of fairness and read the requirement of notice into the principles of natural justice. 14. As _Orma Marble World_ has held, it is not unusual, for example, even for civil courts, under Order XXXIX Rule 1 and 2, to attach the properties first and then notify the respondents. The courts do so only to ensure that the property to be attached does not disappear or dissipate itself before the petitioner could attach them. 15. At any rate, we need to examine Section 14 of the SARFAESI Act to appreciate its statutory contours. And it reads: “14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.- (1) Where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured assets is required to be sold or transferred by the secured creditor under the provisions of this Act, the secured creditor may, for the purpose of taking possession or control of any such secured asset, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within whose jurisdiction any such secured asset or other documents relating thereto may be situated or found, to take possession thereof, and the Chief Metropolitan Magistrate or, as the case may be, the District Magistrate shall on such request being made to him-- (a) take possession of such asset and documents relating thereto; and (b) forward such assets and documents to the secured creditor. -8- W.P.(C). No. 29763 of 2018 (2) For the purpose of securing compliance with the provisions of sub-section(1), the Chief Metropolitan Magistrate of the District Magistrate may take or cause to be taken such steps and use, or cause to be used, such force, as may be, in his option, be necessary. (3) No act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of this section shall be called in question in any Court or before any authority." 16. On Section 14—especially on its scope—we have one too many pronouncements, leading to a dizzying judicial dicta. But the issue rears its head frequently, for various reasons. This Court on 30[th] October 2007 in _C R Sindhu_ has quoted with approval _Transcore v Union of India[6]_ . And it has held that the object of the Securitisation Act “is to accelerate the process of recovery of debts and to remove the obstacles in the way of realisation of debts enabling recovery of debts by a non adjudicatory process”. It has gone on to observe that the strong bias of the legal fraternity towards “the adversarial litigation paved the way for the degeneration of the regular Civil Courts where delay and digression defeat the justice delivery process”. Technical hairsplitting, bemoans _C R Sindhu,_ has become the bane of our Law Courts, giving rise to cynicism among the public at large over the interminable delay in civil litigation. Only to provide for liquidation 6 AIR 2007 SC 712 -9- W.P.(C). No. 29763 of 2018 of secured assets on a war footing has the Parliament “enacted the Securitisation Act for quicker remedies to Banks and Financial Institutions through a non adjudicatory process”. 17. According to _C R Sindhu,_ the Act treats the liability of the borrower to repay the secured debt as crystallised. And to remove all fetters on the secured creditor's rights to choose one or more of the cumulative remedies under the Act, the Act lays down an expeditious mechanism. So the recovery of the dues to the banks and financial institutions is not delayed by any adjudicatory process. For the existing procedure breeds delay. Thus, when a secured creditor who is entitled to possession of the secured asset by S.13(4)(a) makes a written request under S.14(1) of the Act to the Chief Judicial Magistrate, what the Chief Judicial Magistrate does is only to assist the secured creditor to take possession of the secured asset. 18. First, it is optional for the secured Creditor to request the Magistrate for assistance. Once requested, then, the Magistrate has no other option than taking possession of the asset and hand it over to the secured creditor. The use of the expression, "shall" after the -10- W.P.(C). No. 29763 of 2018 words 'District Magistrate', according to _C. R. Sindhu_ , in sub-section (1) indicates one thing: when a request is made by the secured creditor, the Magistrate is bound to take possession of the asset and hand it over to the secured creditor. The Magistrate, holds _C. R. Sindhu_ , has no discretion. Sub-section 3 of S. 14 clarifies that the act (not “order”), as stressed by _C. R. Sindhu_ , of taking possession of the asset by the CJM is not justiciable, and it shall not be called in question in any Court or authority. 19. Under S.17 of the SARFAESI Act, any person, including the borrower, aggrieved by the measures referred to in sub-section 4 of S.13 taken by the secured creditor or his authorised officer can prefer an application within 45 days, to the Debt Recovery Tribunal, after paying the prescribed fee. If the DRT concludes that the secured creditor has not taken possession of the asset by violating the Act and the Rules, it can even restore possession to the borrower, under subsection 3 of S.17. When the person aggrieved has got a right to have his grievance adjudicated upon by a Tribunal whose orders are subject to further appeal, it is futile for the revision petitioner, -11- W.P.(C). No. 29763 of 2018 declares _C. R. Sindhu_ , to contend that the Magistrate acting under S. 14 of the Act was bound to give notice to the revision petitioner before taking possession of the asset. 20. Later, on 05.07.2013, another learned single Judge, in _Housing Development Finance Corporation_ , has held that Section 14 does not expressly interdict the CJM's power to put the borrower on notice. Soon thereafter, on 23.06.2017, another learned single Judge in _Roshan Narayan_ has reaffirmed _C. R. Sindhu._ In _V. Noble Kumar_ 's case, the Supreme Court has held that under Section 14 the CJM only discharges administrative function. It has in fact held that under Section 14, a secured creditor who desires to seek the assistance of the State's coercive power for obtaining possession of the secured asset must make a request in writing to the CJM or District Magistrate within whose jurisdiction, the secured asset is located. 21 _. V. Noble Kumar_ also observes that the “appeal” under Section 17 is available to the borrower against any measure taken under Section 13(4); taking possession of the secured asset is only one of the measures that can be taken by the secured creditor. In fact, -12- W.P.(C). No. 29763 of 2018 Section 14 authorizes the Magistrate only to take possession of the property and forward the asset along with the connected documents to the borrower. Therefore, the borrower always may prefer an "appeal” 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. 22. So _V. Noble Kumar_ concludes 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. In the end, _V. Noble Kumar_ lists out the methods the secured creditor could adopt to take possession of the secured asset. I need not elaborate on them. 23. True, _Noble Kumar_ does not expressly deal with the question whether the borrowers could be put on notice. In other words, -13- W.P.(C). No. 29763 of 2018 whether section 14 constricts the CJM's powers from issuing notice to the respondent borrowers. But the tone and tenor of the judgment is unmistakable; the respondents will have no cause of action until they are dispossessed from the secured asset. 23. At any rate, while the learned Single Judge rendered the judgment in _Housing Development Finance Corporation_ on 05.07.2013, it seems that the parties to the litigation did not bring to his Lordship's notice the judgment in _CR Sindhu,_ which was rendered on 30[th] October 2007. I reckon if at all _CR Sindhu,_ had been brought to the notice of the learned Single Judge, His Lordship might have taken a different view for the judgment of a co-equal bench binds. At any rate, _CR Sindhu_ is the earlier judgment and any judgment contrary to it by a co-equal bench cannot be sustained. Therefore, the Doctrine of _Stare Decisis_ and judicial propriety mandate that I should follow _CR sindhu,_ as I have done earlier, too. 24. I, therefore, hold that Section 14 does not empower the Chief Judicial Magistrate to put the respondent borrowers on notice. As a result, I allow the writ petition, holding that the Chief Judicial -14- W.P.(C). No. 29763 of 2018 Magistrate, Manjeri, shall hear the matter at the earliest, without further adjournment and pass appropriate orders by advancing it to the nearest date possible, as the learned Magistrate's board permits. At any rate, given the assurance by the Bank's counsel, the respondent borrowers may as well approach the Bank and revive their request for rescheduling the loan by providing instalments. 25. The respondents' counsel also submits that the respondents appearance in this writ petition or their prayer for instalments will not affect their right to approach the Debt Recovery Tribunal if they still have a subsisting cause of action. This Court, by way of judicial orders, neither confers on nor takes away from a party any right to legal remedy. The right to legal remedy, in other words, is inherent to a cause. With the above observations, the writ petitions stands disposed of. **Sd/-** **DAMA SESHADRI NAIDU** **JUDGE** das -15- W.P.(C). No. 29763 of 2018 ## **APPENDIX** ## **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 THE TRUE COPY OF PETITION CRL. M.P. NO.1589/2018 FILED BEFORE THE CHIEF JUDICIAL MAGISTRATE COURT, MANJERI.**