JUDGMENT :

A.K. GOEL, J.

The question referred for consideration of this Bench is whether provisions of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 can be invoked with reference to the loan transaction entered into prior to coming into force of the said Act?

2. A Division Bench of this Court in Subash Chandra Panda v. State of Orissa and others, AIR 2008 Orissa 88 held in the negative while contra view has been taken by Uttaranchal High Court and Allahabad High Court in Unique Engineering Works v. Union of India and others, II (2004) BC 241 (DB) and Pradeep Kumar Gupta and another v. State of U.P. and others, AIR 2010 All. 3 respectively.

3. It may be necessary to advert to some basic facts giving rise to the question. The Orissa Rural Housing Development Corporation Limited (ORHDC) advanced loan to the petitioner-builder against mortgage of property in the year 1998. SARFAESI Act came into force on 17.12.2002 replacing the corresponding provisions of ordinance which came into force from 21.6.2002. The Act inter alia provides for enforcing of Security Interest by a Secured Creditor without the intervention of Court. The term 'Secured creditor' means a bank or 'financial institution' and other entities as defined under Section 2(zd). The financial institution is defined under Section 2(m) of the Act to mean institutions specifically described therein and any other institution which may be so specified by a notification by the Central Government. The Central Government has notified several financial institutions under the said provision from time to time, including ORHDC. ORHDC was so notified on 10.11.2003. Thereafter, ORHDC invoked provisions of Section 13 of the SARFAESI Act and issued impugned notices dated 8.12.2004 and 18.4.2005 under Section 13(2) and 13(4) of the Act, followed by sale notice dated 25.6.2005. The said notices have been impugned by the affected parties.

4. One of the contentions though raised belatedly was that the SARFAESI Act could not be invoked in respect of loan transaction entered into prior to 10.11.2003. This plea was supported by Division Bench of this Court-in Subash Chandra Panda.

5. However, financial institution sought reconsideration of the view expressed in Subash Chandra Panda and the Division Bench hearing the matter considered it appropriate to refer the matter to a larger Bench. Hence this reference.

6. We have heard learned counsel for the petitioner, learned counsel for the financial institution and learned Amicus Curiae.

7. It would be appropriate to refer to the background of the legislation in question.

The Act is aimed at speedy recovery of defaulted loans in the light of international experience highlighted by Expert Committee known as Andhyarujina Committee and Narasimham Committee, constituted by the Central Government for examining banking sector reforms. The said Committees suggested new law empowering financial institutions to take possession of the securities and sell the same without intervention of the Court. Earlier, for speedy disposal of claims of the bank for recovery of loans, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (DRT) was enacted with a view to set up specialized Tribunals, excluding the jurisdiction of civil Courts.

8. Section 13 of the Act confers power for enforcement of Security Interest of Secured Creditor. Relevant part of the said provision is as follows:

"13. Enforcement of security interest - (1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or Tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his