Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(Guj) 809

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, J.
The Authorised Officer Of Bank Of Baroda – Appellant
Versus
M/s Sarjay Chemicals Pvt. Ltd. – Respondent
Civil Application (For Direction) No. 1 of 2020 In R/Special Civil Application No. 1352 of 2020 With R/Special Civil Application No. 5932 of 2020 With R/Special Civil Application No. 15831 of 2020 With R/Special Civil Application No. 22597 of 2019
Decided on : 22-10-2021

Advocates:
Advocate Appeared:
For the Appellant : MS NALINI S LODHA
For the Respondent: MR. SANDIP C BHATT

Point of Law - It is therefore held that the secured creditor, after service of notice under Rule 8 of the Rules, 2002, is entitled to take symbolic possession of the secured assets so as to sale such assets after following the due procedure as per Rule 8 of the Rules 2002 read with section 13(4)(a) of the SARFAESAI Act. It is for the secured creditor to take actual physical possession of the property to sale the same as vacant property so as to get more price for the secured asset with assistance of State machinery as provided under section 14 of the SARFAESAI Act.

Headnote:
Constitution of India, 1950 - Article 141 - Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - section 13(2), section 13(4), Section 14, Section 17 (7), section 14 (1)(A), section 17 - Recovery of Debts Due to Banks and financial Institutions Act, 1993 - Section 19 (12) - The Security Interest (Enforcement) Rules, 2002 - Rule 9(3), rule 8(1), rule 8(2) onwards, Rule 8 - Enforcement of security interest - Failure of borrower to discharge liabilities in full within period specified - Event of possession of immovable property is actually taken by authorized officer, such property shall be kept in his own custody - Whether bank can proceed under SARFAESAI Act when securitization application was pending and matter was sub judice as well as to whether once symbolic possession is taken by bank whether bank can take physical possession under section 13(4) of SARFAESAI Act - Whether observations made by DRAT while dismissing Appeal filed by respondent-Bank with regard to right of bank to take physical possession of factory, land and building of borrower-company, when symbolic possession is taken under provisions of SARFAESAI Act would be sustainable or not - Whether earnest money deposit and further amount deposited by successful bidders who have preferred Special Civil Application and Special Civil Application are required to be paid interest on amount to be refunded to them by respondent-Bank in view of withdrawal of proceedings initiated under SARFAESAI Act or not - Whether it can be satisfied with symbolic possession or whether it require physical possession to proceed further of selling property.
Findings of the Court - statement made on behalf of respondent-Bank to withdraw proceedings initiated under SARFAESAI Act, respondent-Bank is permitted to initiate fresh proceedings for recovery of outstanding dues of borrower, directors and guarantors under provisions of SARFAESAI Act, 2002 after following due procedure in accordance with law and as a consequence, Securitization Application pending before DRT shall also stand disposed of - Respondent-Bank is directed to refund amount deposited by auction purchasers and petitioners of Special Civil Application and Special Civil Application with 9% simple interest per annum from date of deposit till date of payment within a period of four weeks from today.
Result - Petitions disposed of

JUDGMENT :

1. Heard learned Senior Advocate Mr. Percy Kavina assisted by learned advocate Mr. Nalini Lodha for Bank of Baroda, learned advocate Mr. S.P.Majmudar for the petitioners in Special Civil Application No. 5932 of 2020, learned advocate Mr. A.B.Munshi for the petitioners in Special Civil Application No. 15821 of 2020 and learned advocate Mr. Sandip Bhatt for the respondent-M/s. Sarjay Chemicals Pvt. Ltd.

2. All these petitions are pertaining to the same issue and therefore, the same are heard analogously and are disposed of by this common order.

3. The brief facts of the case are that one M/s. Sarjay Chemicals Private Limited availed financial assistance from the respondent-Bank of Baroda in the year 2015 comprising of term loan of Rs. 650 lakh and cash credit of 100 lakh against the security by way of hypothciation of plant and machinery, stock and book-debts and mortgage of immovable properties being factory land and building situated at GIDC, Phase-II, Dahej, Dist. Bharuch and other properties belonging to the directors of the said company.

4. Bank of Baroda declared the loan account as NPA on 31.10.2018 upon default of payment of installment of term loan and regular payment in the cash credit account and issued notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 [‘SARFAESAI Act’ for short] calling upon the company and its director to pay a sum of Rs. 5,42,74,562.52 with accrued interest and cost.

5. Objections were raised by the borrower company and after rejecting the same, symbolic possession of the secured assets were taken over by the bank in the month of February 2019.

6. Securitisation Application No. 91 of 2019 was filed before the Debt Recovery Tribunal [‘DRT’]-I at Ahmedabad who issued the notice upon the bank returnable on 14.06.2019.

7. During the pendency of the Securitization Application, the bank took over the physical possession of the unit on 26th September, 2019 as no interim relief was granted by the DRT.

8. The Securitization Application No. 91/2019 filed by the borrower-company was preponed 03.10.2019 as amended application was filed to challenge the action of the bank taking physical possession and seek relief for restoration of the physical possession of the unit of the borrower company.

9. The Presiding Officer of the DRT passed an order on 07.10.2019 directing the bank to restore the physical possession of the unit at 8:00 am on 08.10.2019 and adjourned the securitization application for filing a reply by the bank to the amendment application.

10. The respondent-Bank thereafter filed Special Civil Application No. 17638 of 2019 on 09.10.2019 before this Court. This Court by order dated 09.10.2019 stayed operation of the order dated 07.10.2019 till the bank availed the remedy by way of appeal before the Debt Recovery Appellate Tribunal [‘DRAT’ for short] at Mumbai within a period of two weeks.

11. The respondent-bank thereafter filed appeal before the DRAT, Mumbai being Appeal No. 90 of 2019 with Application [For Stay] No. 790 of 2019.

12. The respondent-bank also filed an Application No. 780 of 2019 for urgent interim relief on 20.10.2019 which was granted by the Appellate Tribunal.

13. In the meanwhile, the borrower preferred Interim Application No. 2583 of 2019 in Securitization Application No. 91 of 2019 before the DRT for appointment of the Court Commissioner for taking physical possession of the property from the respondent-bank and to hand over the same on the ground that there was no stay of the order of DRT. The borrowers also filed Miscellaneous Civil Application No. 1 of 2019 in Special Civil Application No. 17638 of 2019 for recall or modification of the order dated 09.10.2019 which was before this Court which came to be dismissed vide order dated 25.11.2019.

14. The Debt Recovery Appellate Tribunal [‘DRAT’], during the course of hearing of the Stay Application No. 790 of 2019, called upon the petitioner to explai

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2021 Supreme(Guj) 809

Cases Referred (1)