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2008 Supreme(Online)(KER) 45218
HIGH COURT OF KERALA
K.S.RADHAKRISHNAN, J
THE KOTTAKKAL CO-OP.URBAN BANK LTD. – Appellant
Versus
T.BALAKRISHNAN – Respondent
WP(C)/25859/2007
OP.URBAN BANK LTD.Advocate
A secured creditor can invoke Section 14 for possession after completing a sale despite initially taking only symbolic possession, reaffirming statutory powers for effective debt recovery.
Headnote:
Securitisation - Security Interest - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Sections 13(2), 13(4)(a), 13(6), 14(1) - The court interpreted that a secured creditor can initiate recovery actions under Section 14 even after symbolic possession and a completed sale, emphasizing the enabling nature of the statutory provisions for effective debt recovery.
Fact of the Case:
The secured creditor filed a petition for assistance under Section 14 after initiating actions under Section 13 of the Act. The Chief Judicial Magistrate dismissed the application, ruling that the secured creditor had already taken possession and sold the property, making the application non-maintainable.
Finding of the Court:
The court found that taking only symbolic possession does not preclude the secured creditor from utilizing Section 14 for actual possession post-sale. It emphasized the creditor’s right to seek judicial help to enforce possession irrespective of the nature of the possession taken initially.
Issues: Whether a secured creditor can invoke Section 14 for taking actual possession after having taken only symbolic possession and completing the sale.
Ratio Decidendi: The provisions of the Act allow a secured creditor to seek assistance to take actual possession following the sale of secured assets, regardless of whether prior symbolic possession was taken.
Final Decision: The impugned order was set aside, making the creditor's application under Section 14 maintainable.
JUDGMENT
“CR”
On account of the first respondent's liability under a security agreement, in terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 , hereinafter, the “Act”, proceedings were initiated by the petitioner under Section 13 (2) of that Act on 19-10-2005. On 15-2-2006, the petitioner, the secured creditor, took what can be called “symbolic possession” of the property leaving the first respondent in defacto physical possession. On 21-3-2006, notice of such action was published. On 27-7-2006, the property was brought to sale. It was bid by a third party. That sale was confirmed on 3-3-2007. Sale certificate was issued in favour of the auction purchaser on 2-4-2007. Thereafter, the petitioner, the secured creditor moved Ext.P1 petition on 9-5- 2007 before the Chief Judicial Magistrate under Section 14(1) of the Act. The Chief Judicial Magistrate issued the impugned Ext.P2 order holding that, going by the recitals in Ext.P1, the secured creditor, the writ petitioner, had already taken possession of the secured asset under the provisions of the Act and had sold the same. Taking the view that the provisions contained in Section 14 of the Act only enables the secured creditor to seek assistance of the Court to take possession or control of the property for effecting sale, it was held that such provision cannot be invoked after the petitioner had, going by its pleadings, taken possession, effected sale and issued sale certificate. It was concluded that there is, therefore, no need to take possession invoking the powers under Section 14 of the Act. However, it is also opined in the impugned Ext.P2 that, if the secured creditor had not obtained possession and only a symbolic sale was effected, it could seek the assistance of the Court under Section 14. Tying down the secured creditor, the writ petitioner, to the allegation in Ext.P1 petition that it had taken possession, the application under Section 14 was dismissed as not maintainable. Hence, this writ petition.
2. There is no controversy between the secured debtor and the secured creditor regarding the sequence of events narrated in the preceding paragraph. The fact that the secured debtor was not actually dispossessed and had continued to be in defacto possession even after the issuance of notice under Section 13 (2), followed by publication in terms of (4)(a) read with Rule 4 of the Security Interest (Enforcement) Rules, 2002, is not disputed. The undisputed situation is that the first respondent continues to be in actual possession though publication has been made regarding dispossession. The question that arises for decision in this context, is as to whether remedy by way of recourse to Section 14 of the Act is available to take actual possession of the secured asset from a secured debtor after completion of sale on the basis of symbolic possession taken on the basis of notice under (4) of the Act read with Rule 6 of the Rules.
3. In support of the writ petition, it is argued that the provision in Section 13 (4)(a) is an enabling one and does not preclude symbolic possession being taken, to be followed by sale. It is pointed out that (8) provides that if the dues of the secured creditor are tendered at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditor. It is further argued that the Scheme of the Rules and the Act does not preclude a sale before actual physical possession is taken. It is ultimately urged that it is only beneficial to the debtor that actual possession is permitted to continue with him even while proceedings are on, on the strength of constructive possession or symbolic possession in exercise of authority under (4) of the Act.
4. Per contra, it is argued for the first respondent that a plain reading of Section 13 (4)(a) and (6) would show that a sale or transfer by the secured creditor with the benefit of the vesti
