2018 PLR IJ 33

 

Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, Section 14, 17  - Remedy of an aggrieved person against an order passed by District Magistrate is before Debts Recovery Tribunal as provided under Section 17 of the Act. 

 

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(2018)2 SCeJ 1145

SUPREME COURT OF INDIA

Securitisation and Reconstruction of Financial Assets and Enforcement of  Security Interest Act, 2002, Section 17, 34  - In view of the law laid down by this Court in Jagdish Singh v. Heeralal and others, (2014) 1 SCC 479 it would be clear and evident that the suit filed by the second respondent is not maintainable,  wherein on almost similar facts, a suit for partition would not be maintainable in a situation where proceedings under the SARFAESI Act had been initiated – Respondent No.2 has an adequate and efficacious remedy to have recourse to the said remedies and agitate before the learned Debts Recovery Tribunal all issues that may be open in law - Untill the aforesaid proceedings are complete while confirming the auction sale in favour of the appellant we direct the appellant not to encumber the property in question or to transfer it to any third party - If  the second respondent approaches the jurisdictional Debts Recovery Tribunal within a period of 45 days from today the said application will be entertained and adjudicated on merits.

 

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SARFAESI

Section 13(2) – Delay of 14 days in filing application.

SUPREME COURT E@journal

 

(2018)2 SCeJ 1111


 

 (2018)1 SCeJ 613

DOD:19th March, 2018

Reported :19th March, 2018

 

SARFAESI

 

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(i) Security Interest (Enforcement) Rules, 2002, Rule 3A  - Rules  framed under the Act  elaborate on the manner in which the representation of the borrower is required to be dealt with  - Rule 3A requires the authorized officer who is an officer specified by the Board of Directors of the secured creditor to consider the representation and modify the notice of demand if satisfied of the need to do so in that regard -  If the authorized officer comes to the conclusion that such representation or objection is not tenable or acceptable, he must communicate the reasons for non-acceptance of the representation or objection within fifteen days - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13(3A).



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(ii) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13(3A) - The borrower may raise an objection against the proposed measures or make a representation explaining the circumstances in which he cannot discharge his liabilities and propose reschedulement - This may result in reconsideration by the creditor of whether or not it would be prudent to carry out the proposed measures and may even result in a renovation of the contract - The borrower may raise an objection or make a representation of any nature that the creditor must consider, and if found not acceptable, may reject the same before proceeding to resort to any of the measures provided by Section 13(4) of the Act - The Parliament transformed the observations of this Court in Mardia Chemicals, into a provision in the Act with a plain intention to introduce a pause for the creditor to rethink and reconsider the action proposed by the debtor - It is a departure from the usual steps that an ordinary creditor is bound to take for recovering the loan i.e. through the intervention of the Court - SARFAESI,  Section 13(3A).                     



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(iii) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13 (3A)  - Whether Section 13 (3A) is mandatory or directory in nature - We find the language of sub-section (3A) to be clearly impulsive - It states that the secured creditor “shall consider such representation or objection and further, if such representation or objection is not acceptable or tenable, he shall communicate the reasons for non-acceptance” thereof - We see no reason to marginalize or dilute the impact of the use of the imperative ‘shall’ by reading it as ‘may’ - The word ‘shall’ invariably raises a presumption that the particular provision is imperative - Moreover, this provision provides for communication of the reasons for not accepting the representation/objection and the requirement to furnish reasons for the same - A provision which requires reasons to be furnished must be considered as mandatory - Such a provision is an integral part of the duty to act fairly and reasonably and not fancifully - We are not prepared in such circumstances to interpret the silence of the Parliament in not providing for any consequence for non-compliance with a duty to furnish reasons - The provision must nonetheless be treated as ‘mandatory’ - It was submitted on behalf of the creditor that the conduct of the debtor does not warrant an interference in this case - However, we are of the view that the construction of the Act should not be affected by the facts of a particular case - For, indeed, where the remedy invoked is a discretionary remedy, the Court may deny relief if the circumstances so warrant - SARFAESI,  Section 13(3A).  

 

(iv) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 13 (3A)  - Violation of Section 13 (3A)  cannot be of any avail to the debtor whose conduct has been merely to seek time and not repay the loan as promised on several occasions - Loan was taken by the debtor which was not paid, the debtor did not respond to a notice of demand and made a representation which was not replied to in writing by the creditor - Creditor, however, considered the proposals for repayment of the loan as contained in the representation in the course of negotiations which continued for a considerable amount of time -  Several opportunities were in fact availed of by the debtor for the repayment of the loan after the proceedings were initiated by the secured creditor -  The debtor failed to discharge its liabilities and eventually undertook that if the debtor fails to discharge the debt, the creditor would be entitled to take realize the secured assets - Therefore, the debtor is not entitled for the discretionary equitable relief under Articles 226 and 136 of the Constitution of India in the present case - Constitution of India, Articles 136 and 226- SARFAESI,  Section 13(3A).            



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(v) “Without Prejudice”  - Letter of Undertaking “Without Prejudice” – Letter containing the undertaking that if the debt was not paid, the creditor could take over the secured assets - Submission on behalf of the debtor that the letter of undertaking was given in the course of negotiations and cannot be held to be an evidence of the acknowledgement of liability of the debtor, apart from being untenable in law, reiterates the attempt to evade liability and must be rejected - The submission that the letter was written without prejudice to the legal rights and remedies available under any law and therefore the acknowledgement or the undertaking has no legal effect must likewise be rejected - Mere introduction of the words “without prejudice” have no significance and the debtor clearly acknowledged the debt even after action was initiated under the SARFAESI Act and even after payment of a smaller sum, the debtor has consistently refused to pay up - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - SARFAESI.

 

(vi) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 2(zf) ,  31 (i)  - Agricultural Land  - Inclusion of Agricultural Land as Security Interest in the Notice of Recovery - The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court  - The plain intention of the provision is to exempt agricultural land from the provisions of the Act - In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, if such security interest is in respect of agricultural land - The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act -  It is also intended to deter the creation of security interest over agricultural land as defined in Section 2 (zf) - Thus, security interest cannot be created in respect of property specified in Section 31 – SARFAESI, Section 2(zf) ,  31 (i) .


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(vii) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 31 (i)  - Inclusion of Agricultural Land as Security Interest  - Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis - Security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa - Some parcels of land now claimed as agricultural land were apparently purchased by the debtor from agriculturists and are entered as agricultural lands in the revenue records -  The mortgage is intended to cover the entire property of the Goa Hotel -  Prima facie, apart from the fact that the parties themselves understood that the lands in question are not agricultural, it also appears that having regard to the use to which they are put and  the purpose of such use, they are indeed not agricultural - – SARFAESI, Section 2(zf),  31 (i).  

 

 

(viii) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 31 (i)   - The validity of Section 31(i) which in any case deals with security interest created over agricultural land and not agricultural land itself, is an integral part of the Sarfaesi Act and cannot be questioned on the ground of legislative competence – SARFAESI.                                                                                                                       

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(ix) Symbolic Possession - We find nothing in the provisions of the Act that renders taking over of symbolic possession illegal - This is a well- known device in law - Delivery of symbolic possession amounted to an interruption of adverse possession of a party and the period of limitation for the application of Article 144 of the Limitation Act would start from such date of the delivery – SARFAESI - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.                                                                                                                                  

(x) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Section 2(d) , 14  - Whether the creditor could maintain an application of possession under Section 14 of the Act, even though it had taken over only symbolic possession before the sale of the property to the auction purchaser, depends on whether it remained a secured creditor after having done so - Creditor took over symbolic possession of the property on 20.06.2013 - Thereupon, it transferred the property to the sole bidder and issued a sale certificate on 25.02.2015 -  On the same day, i.e., 25.02.2015, the creditor applied for taking physical possession of the secured assets under Section 14 of the Act - In this case, the creditor did not have actual possession of the secured asset but only a constructive or symbolic possession - The transfer of the secured asset by the creditor therefore cannot be construed to be a complete transfer as contemplated by Section 8 of the Transfer of Property Act - The creditor nevertheless had a right to take actual possession of the secured assets and must therefore be held to be a secured creditor even after the limited transfer to the auction purchaser under the agreement dated 25.02.2015 - Thus, the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus remained a secured creditor in the Act - Symbolic possession - SARFAESI.                                                                 

  • Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002, (Sarfaesi), Section 2(d) , 14  - Whether the creditor could maintain an application of possession under Section 14 of the Act, even though it had taken over only symbolic possession before the sale of the property to the auction purchaser, depends on whether it remained a secured creditor after having done so - Creditor took over symbolic possession of the property on 20.06.2013 - Thereupon, it transferred the property to the sole bidder and issued a sale certificate on 25.02.2015 -  On the same day, i.e., 25.02.2015, the creditor applied for taking physical possession of the secured assets under Section 14 of the Act - In this case, the creditor did not have actual possession of the secured asset but only a constructive or symbolic possession - The transfer of the secured asset by the creditor therefore cannot be construed to be a complete transfer as contemplated by Section 8 of the Transfer of Property Act - The creditor nevertheless had a right to take actual possession of the secured assets and must therefore be held to be a secured creditor even after the limited transfer to the auction purchaser under the agreement dated 25.02.2015 - Thus, the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus remained a secured creditor in the Act - Symbolic possession. (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) - Insurance policy clearly states that the bank was functioning as an agent of the insurance company for the purpose of insurance - As in the incident of fire, the petitioners' entire stock was lost, he suffered huge loss in business, which had to be discontinued - Claim wrongly rejected - Bank instead of pursuing the case with the Insurance Company for getting insurance claim settled, started proceedings against the petitioners under the SARFAESI Act - Had the claim of the Insurance Company been received within reasonable time after the loss was suffered, the object for which the insurance policies are taken would have been achieved - Insurance Company shall pay the aforesaid amount of compensation of insurance claim for less of stock and on account of damage to the building along with interest, at the same rate which the bank had charged interest from the petitioners - The bank shall inform the rate of interest charged from the petitioners to the Insurance Company within one week from the date of receipt of copy of the order - The amount shall be paid by the Insurance Company to the bank within a period of one month from the date of receipt of copy of the order. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) Section 17(1) - Tribunal held that has jurisdiction only for the properties situated in the State of Punjab with reference to the properties situated in the State of Punjab were directed to be continued, whereas for the property situated at Chandigarh, it was dismissed as not maintainable with liberty to the petitioners to approach the appropriate Tribunal - 3 Properties are located in the State of Punjab, whereas 1 property is located at Chandigarh - The application was entertained - Tribunal declined to consider the claim pertaining to the property situated at Chandigarh holding lack of territorial jurisdiction - Party to the litigation should not be driven to different courts. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 14 Proviso, Section 13(4) - District Magistrate is neither vested with any quasi-judicial power nor the obligation cast upon him under Section 14 of the SARFAESI Act involves any adjudicatory process - The nature of the duty assigned to a District Magistrate under this provision is essentially administrative in nature which he has to exercise after due application of mind - The duty entrusted to a District Magistrate is akin to an executing agency designated for the aid and assistance of a Bank or financial institution to secure physical possession of the ‘secured asset’ when it cannot be taken over in the ordinary process under Section 13(4) of the Act - The District Magistrate is vested with no discretion to refuse assistance where the ingredients of first proviso to Section 14(1) are unambiguously satisfied. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 14  - So long as a property is a ‘secured asset’ and its possession cannot be taken over by the secured creditor in ordinary course, such secured creditor is entitled to seek assistance of the District Magistrate under Section 14 to recover its possession - The solitary purpose of the exercise contemplated under Section 13(4) or as a next step under Section 14 is to make available the physical control of the secured asset to the secured creditor to enable the latter to sell such assets and appropriate the sale proceeds to satisfy the secured debt fully or partially, as the case may be - Till such time, a secured creditor is unable to do so, his right to apply under Section 14 and the corresponding duty of the District Magistrate shall continue to subsist. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 13, 14  - Physical possession taken over by the bank – Managing Director of the company allowed to continue in the possession under a custodian agreement as Custodian-cum-Manager of the secured assets – Do not find any substance in the Argument that once the possession of the secured assets is taken over under Section 13(4)(a), no application lies under Section 14 - The chapter is not closed on mere securing physical possession of an asset under Section 13(4)(a) till the entire process reaches to its logical conclusion, namely, the sale of such secured asset and appropriation of the sale proceeds to discharge the debt liability - The duty of the District Magistrate under Section 14 is to facilitate the secured creditor in achieving the above-stated legislative object and such obligation shall remain alive till the secured creditor transfers the secured assets through an auction sale or private negotiation or any other permissible mode of parting with possession for consideration. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 14  -  The order or action under Section 14 is not and cannot be a one-time exercise - For example, if a secured creditor is forcibly dispossessed after taking over possession of the secured assets, the District Magistrate can not deny assistance under Section 14 on the plea that such assistance had been availed earlier - In the event of any change in the circumstances, the District Magistrate would be under a bounden duty to repeat the exercise under Section 14 till the assets are appropriated by the secured creditor - It is a continuing obligation on the District Magistrate. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 14  -   Whether the District Magistrate is competent to ‘review’ his own order or the one passed by his predecessor under Section 14 of the SARFAESI Act? - There is no provision under the SARFAESI Act under which the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, can review, recall or modify his order - The successor District Magistrate, had no jurisdiction whatsoever either to entertain the borrower’s application after order for taking over possession had been passed or to pass the orders adjourning the ongoing proceedings sine die till the objections filed by the borrowers or counter-objections were to be decided or declare his predecessor’s order as null and void - These orders are totally without jurisdiction and void ab initio, for it is well settled that the power to review is not an inherent power and it must always be conferred by law either expressly or by necessary implication - The so-called reasons assigned by the successor District Magistrate, even if assumed to be correct, did not and can not clothe him with a non-existent power to review the order passed by him or his predecessor - District Magistrate, had no authority or power to review the earlier order and his subsequent orders being without any authority of law, cannot sustain. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 14 - What is the remedy available to a borrower or guarantor against whom the District Magistrate has passed an order under Section 14 to provide assistance to the secured creditor in taking possession of the secured asset? -  Once the District Magistrate, had invoked his powers under Section 14 of the Act the borrowers had no other remedy except to approach the Debt Recovery Tribunal under Section 17 of the Act - The order passed by a District Magistrate under Section 14 is surely supplemental to one of the  measure defined under Section 13(4)(a) of the Act -  Hence the appropriate remedy was to move an appropriate application before the DRT instead of filing a review application before the District Magistrate - In Kanaiyalal Lalchand Sachdev and others v. State of Maharashtra and others, (2011)2 SCC 782, the Supreme Court has unequivocally held that an action under Section 14 of the Act constitutes an action taken after the stage of Section 13(4) and therefore would fall within the ambit of Section 17(1) of the Act - As the borrowers failed to avail their remedy under Section 17 of the Act, the order passed by the District Magistrate has attained finality and it has to be given effect to. (2018-1 ) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002) Section 17(1) – Application for restoration of an application filed under Section 17(1) of the SARFAESI Act which is dismissed in default, is maintainable before the Tribunal.    (2018-1 ) PUNJAB LAW REPORTER
  • Security Interest (Enforcement) Rules, 2002, Rule 3A  - Rules  framed under the Act  elaborate on the manner in which the representation of the borrower is required to be dealt with  - Rule 3A requires the authorized officer who is an officer specified by the Board of Directors of the secured creditor to consider the representation and modify the notice of demand if satisfied of the need to do so in that regard -  If the authorized officer comes to the conclusion that such representation or objection is not tenable or acceptable, he must communicate the reasons for non-acceptance of the representation or objection within fifteen days - Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 13(3A).  (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 13(3A)  - Violation of Section 13 (3A)  cannot be of any avail to the debtor whose conduct has been merely to seek time and not repay the loan as promised on several occasions - Loan was taken by the debtor which was not paid, the debtor did not respond to a notice of demand and made a representation which was not replied to in writing by the creditor - Creditor, however, considered the proposals for repayment of the loan as contained in the representation in the course of negotiations which continued for a considerable amount of time -  Several opportunities were in fact availed of by the debtor for the repayment of the loan after the proceedings were initiated by the secured creditor -  The debtor failed to discharge its liabilities and eventually undertook that if the debtor fails to discharge the debt, the creditor would be entitled to take realize the secured assets - Therefore, the debtor is not entitled for the discretionary equitable relief under Articles 226 and 136 of the Constitution of India in the present case - Constitution of India, Articles 136 and 226. (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 13(3A)  - Whether Section 13 (3A) is mandatory or directory in nature - We find the language of sub-section (3A) to be clearly impulsive - It states that the secured creditor “shall consider such representation or objection and further, if such representation or objection is not acceptable or tenable, he shall communicate the reasons for non-acceptance” thereof - We see no reason to marginalize or dilute the impact of the use of the imperative ‘shall’ by reading it as ‘may’ - The word ‘shall’ invariably raises a presumption that the particular provision is imperative - Moreover, this provision provides for communication of the reasons for not accepting the representation/objection and the requirement to furnish reasons for the same - A provision which requires reasons to be furnished must be considered as mandatory - Such a provision is an integral part of the duty to act fairly and reasonably and not fancifully - We are not prepared in such circumstances to interpret the silence of the Parliament in not providing for any consequence for non-compliance with a duty to furnish reasons - The provision must nonetheless be treated as ‘mandatory’ - It was submitted on behalf of the creditor that the conduct of the debtor does not warrant an interference in this case - However, we are of the view that the construction of the Act should not be affected by the facts of a particular case - For, indeed, where the remedy invoked is a discretionary remedy, the Court may deny relief if the circumstances so warrant - SARFAESI,  Section 13(3A). (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 13(3A) - The borrower may raise an objection against the proposed measures or make a representation explaining the circumstances in which he cannot discharge his liabilities and propose reschedulement - This may result in reconsideration by the creditor of whether or not it would be prudent to carry out the proposed measures and may even result in a renovation of the contract - The borrower may raise an objection or make a representation of any nature that the creditor must consider, and if found not acceptable, may reject the same before proceeding to resort to any of the measures provided by Section 13(4) of the Act - The Parliament transformed the observations of this Court in Mardia Chemicals, (2014-3)138 PLR 271 (S.C.), into a provision in the Act with a plain intention to introduce a pause for the creditor to rethink and reconsider the action proposed by the debtor - It is a departure from the usual steps that an ordinary creditor is bound to take for recovering the loan i.e. through the intervention of the Court. (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 13(8)    Transfer of the Property Act, Section 60 -  Right of redemption is available to a mortgagor unless it stands extinguished by an act of parties -  The right of the mortgagor to redeem the property survives until there has been a transfer of the mortgagor’s interest by a registered instrument of sale –  Exercise of the right of redemption is permissible before the execution of the sale in favour of the auction purchaser - Once the sale was complete and was registered, it was not open to the appellant to exercise the equity of redemption - Statute mandates that it is only where the dues of the secured creditor are tendered together with costs, charges and expenses before the date fixed for sale or transfer that the secured asset is not to be sold or transferred - SARFAESI Act. (S.C.) (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 14 – Counsel for the petitioners is right in contending that DRT, Chandigarh, regardless of the orders passed by this Court, does not entertain petitions where physical possession of the secured assets is still with the borrowers and all such petitions are dismissed on this ground alone – Respondent states that they will not raise any objection and DRT be directed to decide the petition on merits, which may be filed by the petitioners even if physical possession of the mortgaged property is with the petitioners at the time of filing of such petition – It is directed that status quo re: physical possession shall be maintained for a period of one month and meanwhile the DRT shall consider the prayer for interim stay subject to just and equitable terms and conditions, as it may deem appropriate.  (2018-2) PUNJAB LAW REPORTER 
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 17 – Debts Recovery Tribunal - Question which would ultimately arise in the suit is whether the mortgage of the property to the extent of 1/8th share was legal and valid or not? – Jurisdiction – That the question of title and partition of the property cannot be decided by the Debts Recovery Tribunal, is wholly misconceived - The Debts Recovery Tribunal has been empowered to decide the application filed by any person aggrieved by any of the measures referred to under Section 13 of the SERFACI Act, 2002 - Section 17 of the Act does not in any manner restrict the jurisdiction of the Debts Recovery Tribunal to decide the question of title or partition of the property. (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 2(zf) ,  31 (i)  - Agricultural Land  - Inclusion of Agricultural Land as Security Interest in the Notice of Recovery - The purpose of enacting Section 31(i) and the meaning of the term “agricultural land” is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court  - The plain intention of the provision is to exempt agricultural land from the provisions of the Act - In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, if such security interest is in respect of agricultural land - The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act -  It is also intended to deter the creation of security interest over agricultural land as defined in Section 2 (zf) - Thus, security interest cannot be created in respect of property specified in Section 31 – SARFAESI, Section 2(zf) ,  31 (i) . (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 31 (i)   - The validity of Section 31(i) which in any case deals with security interest created over agricultural land and not agricultural land itself, is an integral part of the Sarfaesi Act and cannot be questioned on the ground of legislative competence – SARFAESI.  (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 31 (i)  - Inclusion of Agricultural Land as Security Interest  - Obviously, since no security interest can be created in respect of agricultural lands and yet it was so created, goes to show that the parties did not treat the land as agricultural land and that the debtor offered the land as security on this basis - Security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa - Some parcels of land now claimed as agricultural land were apparently purchased by the debtor from agriculturists and are entered as agricultural lands in the revenue records -  The mortgage is intended to cover the entire property of the Goa Hotel -  Prima facie, apart from the fact that the parties themselves understood that the lands in question are not agricultural, it also appears that having regard to the use to which they are put and  the purpose of such use, they are indeed not agricultural. (S.C.). (2018-2) PUNJAB LAW REPORTER
  • Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002),  Section 34, 19(ii) – Where a defendant sets up a counter-claim and the applicant contends that the claim thereby raised ought not be disposed of by way of counter-claim but in an independent action – Order - Relegating the respondent-plaintiffs to Tribunal by treating their suit as counter claim would be horrendous task - The claim of the Bank in petition under Section 19 would only entitle them to claim the amount on the basis of outstanding debt as per the statement of account/balance sheet, whereas, both the reliefs are totally opposite to each other, therefore, cannot be decided by the Tribunal by treating it to be counter claim. (2018-2) PUNJAB LAW REPORTER
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