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CASE NO.:

Appeal (civil) 3228 of 2006

PETITIONER:

M/s Transcore

RESPONDENT:

Union of India & Anr

DATE OF JUDGMENT: 29/11/2006

BENCH:

Arijit Pasayat & S. H. Kapadia

JUDGMENT:

J U D G M E N T

with

Civil Appeal Nos. 1374/06, 2841/06, 3225/06, 3226/06 and 908/06.

KAPADIA, J.

A short question of public importance arises for determination,

namely, whether withdrawal of O.A. in terms of the first proviso to Section

19(1) of the DRT Act, 1993 (inserted by the Amending Act No.30 of 2004)

is a condition precedent to taking recourse to the Securitisation and

Reconstruction of Financial Assets and Enforcement of Security Interest

Act, 2002 ("NPA Act" for short).

Facts in Civil Appeal No. 3228 of 2006:

Since the above question arises in a batch of matters, for the sake of

convenience, we refer briefly to the facts in civil appeal No. 3228/06, in

which M/s Transco is the appellant.

In March 1999, O.A. No. 354/99 was filed by Indian Overseas Bank

("the bank") before the DRT, Chennai for recovery of dues from M/s

Transcore- appellant herein. The claim was disputed. An interlocutory

application was filed by the bank in the said O.A. to bring the properties to

sell. That I.A. is pending even today.

On 6.1.2003, a notice under Section 13(2) of the NPA Act was issued.

On 11.11.2004 the following provisos were introduced in Section 19(1) of

the DRT Act vide amending Act 30 of 2004:

"Provided that the bank or financial institution

may, with the permission of the Debts Recovery

Tribunal, on an application made by it, withdraw the

application, whether made before or after the

Enforcement of Security Interest and Recovery of Debts

Laws( Amendment) Act, 2004 for the purpose of taking

action under the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest

Act, 2002 (54 of 2002), if no such action had been taken

earlier under that Act:

Provided further that any application made under

the first proviso for seeking permission from the Debts

Recovery Tribunal to withdraw the application made

under sub-section (1) shall be dealt with by it as

expeditiously as possible and disposed of within thirty

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days from the date of such application:

Provided also that in case the Debts Recovery

Tribunal refuses to grant permission for withdrawal of

the application filed under this sub-section, it shall pass

such orders after recording the reasons therefor."

On 8.1.2005, the said bank issued Possession Notice under Section

13(4) of the NPA Act read with Rule 8 of the Security Interest

(Enforcement) Rules, 2002 ("2002 Rules") stating that, vide notice dated

6.1.2003, the appellant herein (M/s Transcore) was called upon to repay an

amount of Rs. 4.15 crores (approximately) together with interest within sixty

days; that the appellant had failed to repay the amount; that a notice was also

given to the guarantor; that the bank had taken possession of the immovable

properties mentioned in the schedule to the Notice; and, that the appellant

and the guarantor were directed not to deal with those immovable properties.

By the said Possession Notice, the public in general were also told not to

deal with the properties mentioned in the Notice as they were subject to the

charge of the bank for the aforesaid amount with interest and cost. The

immovable properties were put to auction. However, pending civil appeal,

confirmation of auction sale had been stayed.

As far as M/s Transcore, the appellant herein, is concerned, the

argument is that the respondent-bank (Indian Overseas Bank) could not have

invoked the NPA Act under the above proviso to Section 19(1) of the DRT

Act without the prior permission of the Tribunal before whom O.A. 354/99

was pending. The contention of the appellant is, that prior to the insertion of

the proviso on 1