Back
2011 Supreme(Cal) 1166
IN THE HIGH COURT AT CALCUTTA
PINAKI CHANDRA GHOSE AND SHUKLA KABIR (SINHA), JJ.
Sri Anil Kumar Banerjee & Anr.
Vs.
Indiabulls Housing Finance Limited
C.A.N. No. 3497 of 2010, M.A.T. No. 494 of 2010 and W.P. No. 6012 (w) of 2010
Decided On : 25.08.2011.
Advocate Appeared:
For Appellant : Mr. Saktinath Mukherjee, Mr. Reetobroto Mitra, Mr. Uddalok Bhattacharjee
For Respondent: Mr. Jayanta Kumar Mitra, Mr. Paritosh Sinha, Mr. Amitava Mitra, Adv.
The SARFAESI Act is applicable to secured interest created at the time of grant of financial assistance either before enforcement of Act or before notification under Section 2(1)(m)(iv) of the Act, and the Chief Judicial Magistrate has the power to pass an order under Section 14 of the Act.
Headnote:
SARFAESI ACT - SECTION 13, 14 - ICICI BANK VS. PINAKI CHANDRA GHOSE - APPLICABILITY OF SARFAESI ACT TO LOANS GRANTED PRIOR TO ITS ENACTMENT - POWER OF CHIEF JUDICIAL MAGISTRATE TO PASS ORDERS UNDER SECTION 14 - JURISDICTION OF DEBT RECOVERY TRIBUNAL.
Fact of the Case:
Writ petition was filed challenging the order passed by the Chief Judicial Magistrate, Alipore, District- South 24-Parganas, on an application being filed under Section 14 of the SARFAESI Act by the respondent. The appellant contended that the respondent was not a financial institution authorized to carry on business as such under the SARFAESI Act and that the Chief Judicial Magistrate did not have the power to pass an order under Section 14 of the Act.
Finding of the Court:
The court held that the respondent was a financial institution authorized to carry on business as such under the SARFAESI Act, that the secured interest created at the time of grant of financial assistance either before enforcement of Act or before notification under Section 2(1)(m)(iv) of the Act, would not affect remedies made available to a secured creditor for securitisation of financial assets and enforcement of the secured interest under the Act of 2002, and that the Chief Judicial Magistrate had the power to pass an order under Section 14 of the Act.
Issues: 1. Whether the respondent was a financial institution authorized to carry on business as such under the SARFAESI Act? 2. Whether the secured interest created at the time of grant of financial assistance either before enforcement of Act or before notification under Section 2(1)(m)(iv) of the Act, would affect remedies made available to a secured creditor for securitisation of financial assets and enforcement of the secured interest under the Act of 2002? 3. Whether the Chief Judicial Magistrate had the power to pass an order under Section 14 of the Act?
Ratio Decidendi: 1. The court held that the respondent was a financial institution authorized to carry on business as such under the SARFAESI Act on the basis of the following: - The respondent was recognized as a Housing Financial Institutions on 20th December, 2005 and the loan agreement with the appellant was on 29th January, 2007 and the loan was against the Residential Flat which has been stated specifically. - A notice was also issued thereof. - On 19th September, 2007 the respondent was declared as a financial institution for the purpose of the said Act of 2002. - On 18th June, 1997 the Non-banking Financial Companies which are Housing Financial Institutions have been exempted from the Reserve Bank of India, Act in terms of the notification bearing No. DFC (COC) No. 112 ED(SG)/97 read with Circular DFC (COC) No.4438/02.04/96-97 dated 18th June, 1997 and the Master Circular dated 1st July, 2009 it appears to us that the respondent company has already been exempted under Section 45(NC) of the Reserve Bank of India Act. 2. The court held that the secured interest created at the time of grant of financial assistance either before enforcement of Act or before notification under Section 2(1)(m)(iv) of the Act, would not affect remedies made available to a secured creditor for securitisation of financial assets and enforcement of the secured interest under the Act of 2002 on the basis of the following: - The Act is a procedural law which gives a right to the Bank to take possession of the property for non-payment of dues without intervention of the Court providing a remedy for an appeal to the learned Tribunal when a possession has been taken by the Financial Institution or Bank wrongly and without any authority. - It is not in dispute that whether the security was credited prior to the enforcement of the Act or by any notification by which the banking company is notified with regard to the applicability of the Act in question shall not make any difference. - In fact, the provisions relating to the registration of Securitisation or Reconstruction Company must be reached with a retrospective effect. - The securitisation is nothing but a procedure for which the rights may have created prior to the enforcement of the Act. - It is only the enforcement of those rights then the Act comes to play its role. - It does not create a fresh right in the matter of procedures of securitisation. 3. The court held that the Chief Judicial Magistrate had the power to pass an order under Section 14 of the Act on the basis of the following: - The proper reading of Sections 6, 8, 11, 12 and 17 read with Sections 2(k) and 3 of the Criminal Procedure Code will clearly indicate that the Chief Judicial Magistrate in a Non-Metropolitan area stands on the same footing as of a Chief Metropolitan Magistrate in a Metropolitan area and, therefore, he is vested all powers of a Chief Metropolitan Magistrate in a Metropolitan Area.
Final Decision: The court dismissed the appeal and held that the order passed by the Chief Judicial Magistrate was valid.
PINAKI CHANDRA GHOSE, J.
This appeal is directed against an order dated 24th March, 2010 passed by the Hon’ble Single Judge when His Lordship was pleased to dismiss the writ petition on the ground that the writ petitioner/appellant herein has defaulted in repayment of loan and proceedings have been initiated under Section 13 of the SARFAESI Act (hereinafter referred to as the said Act) and he has been dispossessed from his dwelling house.
2. The Hon’ble Single Judge passed the said order on the ground that there is no statutory violation has been demonstrated. However, remedy provided by the Act shall be open to the writ petitioner/appellant to pursue such remedy.
3. Being aggrieved, this appeal has been filed by the appellant.
4. The facts of the case briefly are as follows :
At the instance of the writ petitioner/appellant loan was granted by the ICICI Bank. The outstanding loan shown as on 23rd February, 2007 was Rs.58,24,055/-. The said loan amount was taken up by the respondent on the same date after exec ution of the document between the parties. On 14th March, 2007 the respondent handed over a cheque for Rs.16,93,512/- which was credited in the account of the appellant and it is a case of the writ petitioner/appellant that for the purpose of availing of such credit facilities the petitioner/appellant credited an equitable mortgage over and in respect of Flat No.10E, 10th Floor, Neelkamal Apartment at No. 41, Elgin Road, Kolkata.
5. It is admitted by the appellant that in two loan accounts Rs.58,24,055/-and Rs.16,93,512/- respectively were granted by the Bank and the appellants were required to pay Rs.78,333/- and Rs.23,164/- respectively as the Equated Monthly Installments (EMI). Such EMI in respect of first loan account commenced from 5th March, 2007 and would have been paid upto 5th February, 2023. In respect of second loan account, EMI commenced from 5th April, 2007 and would have been continued till 5th March, 2023. It is their case that they have paid Rs.19,44,905/-in respect of the first loan agreement and Rs.8,70,094/- in respect of the second loan agreement.
6. It is also admitted that due to adverse business condition, the petitioner/appellant approached the respondent for re-scheduling of the loan and for certain concession including reduction in the rate of interest. However, no steps were taken by the respondent in the matter and on 3rd March, 2009 the respondent issued notices claiming under Section 13(2) of the said Act on the petitioner/appellant.
7. On 30th March, 2009 the appellants made representation before the respondent under Section 13(3A) of the said Act which was turned down by the respondent on 8th April, 2009 and thereafter on 17th June, 2009 the respondent issued notices under Section 13(4) of the said Act.
8. It is the case of the appellant that on 18th February, 2010 an order was passed by the learned Chief Judicial Magistrate, Alipore, District- South 24Parganas, on an application being filed under Section 14 of the said Act by the respondent. An order was passed by the said Court resulting the possession of the said residential flat was taken over by the respondent on 19th March, 2010. Hence, the writ petition was filed.
9. It is the case of the appellant that the respondent has acted arbitrarily and mala fide and initiated action under Section 14 of the said Act. It is further stated in respect of the loan agreement being agreement No. HEKOL 12014, the account was not declared as a NPA on 31st December, 2009. Therefore no action in law could have been initiated under Section 14 of the said Act in respect of said loan amount. Hence, the order passed by the Chief Judicial Magistrate on 18th February, 2010 is required to be set aside and/or quashed.
10. It is further stated that the order of the learned Chief Judicial Magistrate, South 24-Parganas in case No. 1208 of 2010 and the order passed thereon dated 18th February, 2010 is void abinitio and is required to be set aside and
