The question, we have been called upon to decide on a reference made by the learned Single Judge, is `whether the time-limit of one week provided in sub-section (3A) of Section 13 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `the Securitisation Act') for communicating the non-acceptance of the representation/objections made by the borrower in response to a notice issued under sub-section (2) of Section 13, is mandatory or directory?

A learned Single Judge of this Court in Special Civil Application No.4045 of 2007 took the view that the same is a mandatory requirement, and non-compliance of that mandatory requirement within one week of the receipt of the representation/objections filed by the borrower would vitiate the proceedings initiated by the secured creditor under Section 13(4) of the Securitisation Act. When this case came up for hearing before another Judge, learned Judge took the view that the obligation cast upon the secured creditor is only to consider the objections filed by the borrower and take appropriate decision before taking any action under Section 13(4) of the Act. Learned Judge took the view that when there is substantial compliance of the provisions of sub-section (3A) of Section 13 of the Securitisation Act read with Rule 3A of The Security Interest (Enforcement) Rules, 2002 (for short `the Rules'), it cannot be said that merely because 7 days have expired or the decision was not taken within a period of 7 days and was taken at a later date, further action under Section 13(4) of the Securitisation Act would not be vitiated.

We have heard learned counsel for the parties at length.

Securitisation Act was enacted to regulate Securitisation and reconstruction of financial assets and enforcement of security interest and matters connected thereto. The Act enables the Banks and Financial Institutions to realise long-term assets, manage problem of liquidity, asset liability mismatches and improve recovery by exercising powers to take possession of securities, sell them and reduce non-performing assets by adopting measures for recovery or reconstruction. The Act further provides for setting up of asset reconstruction companies which are empowered to take possession of secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured assets and take over the management of the business of the borrower.

The constitutional validity of the above Act came up for consideration before the Apex Court in Mardia Chemicals Ltd. v. Union of India (AIR 2004 SC 2371). The Apex Court upheld the validity of the provisions of the Act except that of sub-section (2) of Section 17 of the Act which was declared ultravires of Article 14 of the Constitution of India. The Apex Court observed that in cases where a secured creditor has taken action under sub-section (4) of Section 13 of the Act, it would be open to borrowers to file appeals under Section 17 of the Act within the limitation as prescribed therefor. The Apex Court also observed that the borrower, after service of notice under sub-section (2) of Section 13 of the Act, raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower. The Court also observed that the reasons so communicated shall only be for the purposes of information/knowledge of the borrower without giving rise to any right to approach the Debts Recovery Tribunal under Section 17 of the Act.

The Parliament felt that in view of the various observations made by the Supreme Court in Mardia Chemicals (supra) case and also to discourage the borrowers to postpone the repayment of their dues and also enable the secured creditor to speedily recover their debts, if required, by enfor