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SUPREME COURT OF INDIA
L. NAGESWARA RAO, HEMANT GUPTA, AJAY RASTOGI, JJ.
C. Bright – Appellant
Versus
The District Collector and Others – Respondents
Civil Appeal No.3441 of 2020 (Arising Out of SLP (Civil) No. 12381 of 2020) (Diary No. 46087 of 2019)
Decided On : 05-11-2020
(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 14 – Possession of secured asset – Remedy under Section 14 of Act is not rendered redundant if District Magistrate is unable to handover possession – District Magistrate will still be enjoined upon duty to facilitate delivery of possession at the earliest – Purpose of Act pertains to speedy recovery of dues by banks and financial institutions – True intention of Legislature is a determining factor herein – Keeping objective of Act in mind, time limit to take action by District Magistrate has been fixed to impress upon authority to take possession of secured assets – However, inability to take possession within time limit does not render District Magistrate Functus Officio – Secured creditor has no control over District Magistrate who is exercising jurisdiction under Section 14 of Act for public good to facilitate recovery of public dues – Section 14 of Act is not to be interpreted literally without considering object and purpose of Act – If any other interpretation is placed upon language of Section 14, it would be contrary to the purpose of Act – Time limit is to instil confidence in creditors that District Magistrate will make attempt to deliver possession as well as to impose a duty on District Magistrate to make an earnest effort to comply with mandate of statute to deliver possession within 30 days and for reasons to be recorded within 60 days – Remedy of an aggrieved person by a secured creditor under Act is by way of application before Debts Recovery Tribunal – Interim orders should generally not be passed without hearing secured creditor as interim orders defeat very purpose of expeditious recovery of public money – Order passed by High Court upheld – Appeal dismissed. (Paras 20, 21 and 22)
(B) Interpretation of Statute – Principle of Literal Construction – When a statute uses word “shall”, prima facie, it is mandatory, but Court may ascertain real intention of legislature by carefully attending to whole scope of statute – Use of word “shall” in a statute, does not necessarily mean that in every case it is mandatory that unless words of statute are literally followed, proceeding or outcome of proceeding, would be invalid – It is not always correct to say that if word “may” has been used, statute is only permissive or directory in sense that non-compliance with those provisions will not render proceeding invalid – Principle of literal construction of statute alone in all circumstances without examining context and scheme of statute may not serve purpose of statute. (Para 7)
Facts of the Case:
Challenge in the present appeal is to an order passed by Division Bench of the Kerala High Court of 19.7.2019, whereby it was held that Section 14 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 mandating the District Magistrate to deliver possession of a secured asset within 30 days, extendable to an aggregate of 60 days upon reasons recorded in writing, is a directory provision.
Findings of Court:
cases relating to recovery of dues of banks, financial institutions and secured creditors, stay granted by High Court would have serious adverse impact on financial health of such bodies/institutions, which will ultimately prove detrimental to the economy of the nation. Therefore, High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. High Courts are well aware of the limitations in exercising their jurisdiction when affective alternative remedies are available, but a word of caution would be still necessary for High Courts that interim orders should generally not be passed without hearing secured creditor as interim orders defeat very purpose of expeditious recovery of public money.
Result : Appeal dismissed.
JUDGMENT :
Hemant Gupta, J.
The challenge in the present appeal is to an order passed by the Division Bench of the Kerala High Court of 19.7.2019, whereby it was held that Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20021[For short "the Act"] mandating the District Magistrate to deliver possession of a secured asset within 30 days, extendable to an aggregate of 60 days upon reasons recorded in writing, is a directory provision. The High Court held as under:
"18. The primary question in these Writ Petitions, namely, whether the time limits in section 14 of the SARFAESI Act are mandatory or directory should be answered in light of the principles enumerated above. As stated above, the object and purpose of the said time limit is to ensure that such applications are decided expeditiously so as to enable secured creditors to take physical possession quickly and realise their dues. Moreover, as stated earlier, the consequences of non-compliance with the time limit are not specified and the sequitur thereof would be that the district collector/district magistrate concerned would not be divested of jurisdiction upon expiry of the time limit. In this connection, it is also pertinent to bear in mind that if the "consequences of non-compliance" test is applied, the borrower, guarantor or lessee, as the case may be, is not adversely affected or prejudiced, in any manner, whether such applications are decided in 60, 70 or 80 days. On the other hand, the secured creditor is adversely affected if the provision is construed as mandatory and not directory in as much as it would delay the process of taking physical possession of assets instead of expediting such process by entailing the filing of another application for such purpose. For all these reasons, the time limit stipulation in the amended Section 14 of the SARFAESI Act is directory and not mandatory."
2. The High Court examined Section 14 of the Act as amended, which reads thus:
"14. Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset.- (1)
xx xx xx
Provided, further that on receipt of the affidavit from the Authorised Officer, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, shall, after satisfying the contents of the affidavit pass suitable orders for the purpose of taking possession of the secured asset within a period of thirty days from the date of application:
Provided also that if no order is passed by the Chief Metropolitan Magistrate or District Magistrate within the said period of thirty days for reasons beyond his control, he may, after recording reasons in writing for the same, pass the order within such period not exceeding in the aggregate sixty days."
3. The Act was enacted in the year 2002 for reasons that the legal framework relating to commercial transactions had not kept pace with the changing commercial practices. Further, financial sector reforms resulted in a slow pace of recovery of defaulting loans and mounting level of non-performing assets of banking and financial institutions. The objectives behind the Act, recognised that unlike international banks, banks and financial institutions in India, did not have power to take possession of securities and sell them. The provisions of the Act were upheld by this Court except that of subsection (2) of Section 17 which provided that the Debt Recovery Tribunal shall not entertain an appeal preferred by a borrower unless seventy-five per cent of the amount claimed has been deposited before it, Mardia Chemicals Ltd. & Ors. vs. Union of India & Ors., (2004) 4 SCC 311. Thereafter, the question as to whether the withdrawal of an application filed under the Recovery of Debts due to Banks and Financial Institutions Act, 19933 [For short "DRT Act"] is a condition precedent to take recourse to the Act was examined by this Court., [Transcore vs. Union of India and Anothe
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