B. Gopalakrishnan

RECOVERY IS MOST ESSENTIAL FOR BANKS AND ARCs AS A TOOL TO TACKLE THE GROWING NPAs MENACE

ANY DELAY AND CUMBERSOME PROCEDURE WILL BE ADVATAGEOUS NOT TO THE LENDING INSTITUTION BUT TO THE ERRING BORROWER

THE RECOVERY TOOLS AVAILABLE TODAY ARE NOT EFFECTIVE AS IT WAS THOUGT SO.. AND ARE TIME CONSUMING.

IS THIS A FAILURE OF THE LEGISLATURE OR THE COURTS ?

COURTS HAVE A TENDENCY TO INTERPRET THE PROVISION OF LAW BY ITS LETTER AND NOT BY THE SPRIT AND REASONS FOR ENACTMENT

LACK OF IN-DEPTH KNOWLEDGE OF THE PRACTICAL SIDE OF THE IMPACT OF FAILURE TO RECOVER THE BAD DEBTS AND IT’S EFFECT ON THE ECCONOMY BY THE JUDGES..

THE NEED FOR INTERPRETING THE PROVISIONS IN TUNE WITH THE OBJECTS AND REASONS FOR WHICH AN ACT IS ENACTED

TO PROVE THIS POINT WHAT IS PROPOSED IS A CASE STUDY

WE HAVE TO HAVE A GLANCE OF THE ENACTMENTS MADE BY THE PARLIAMENT TO SPEED UP THE RECOVERY

AS CIVIL COURTS TAKE A LONG TIME AND AS NO RECVERY WAS FORTHCOMING THE LEGISLATURE IN ITS WISDOM ENACTED THE RECOVERY OF DEBT DUE TO BANKS AND FINANCIAL INSTITUTION ACT 1993 (‘DRT ACT’)

AS THE SAID ACT FAILED TO GIVE THE DESIRED RESULT ANOTHER ENACTMENT ENABLING THE BANKS AND FINANCIAL INSTITUTION TO TAKE OVER THE SECURED ASSETS AND SELL IT WITH OUT THE INTERVENTION OF THE COURTS WAS ENACTED NAMELY

THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT 2002 (‘SARFAESI ACT’)

SARFAEISI ACT CHALLENGED AS ULTRA VIRES

WE GOT MARDIA CHEMICALS JUDGEMENT (Mardia Chemicals v/s Union of India A.I.R 2004 S.C 2371: (2004))

WE THOUGHT ALL IS OVER AS IT HELD THAT THE ACT IS NOT ULTRA VIRES

THE PROBLEMS DID NOT STOP THERE

CHALLENGES WRE MADE ON VARIOUS PROVISIONS AND PROCEDURES

THE JURISPRUDENCE BY WAY OF JUDGE MADE LAWS ENRICHED THE SAID BRANCHOF LAW

Issue:

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).

Whether recourse to take possession of the secured assets of the borrower under Section 13(4) of the NPA Act comprehends the power to take actual possession of the immovable property

Held:

Withdrawal of the O.A. pending before the DRT under the DRT Act is not a pre-condition for taking recourse to NPA Act. It is for the bank/FI to exercise its discretion as to cases in which it may apply for leave and in cases where they may not apply for leave to withdraw.

Drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules.

Issue:

Whether Section 38C of the Bombay Sales Tax Act, 1959 [for short the Bombay Act;] and Section 26B of the Kerala General Sales Tax Act, 1963 [for short the Kerala Act;] and similar provision contained in other State legislations by which first charge has been created on the property of the dealer or such other person, who is liable to pay sales tax etc., are inconsistent with the provisions contained in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short `the DRT Act') for recovery of `debt' and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short `the Securitisation Act') for enforcement the Securitisation of `security interest' and whether by virtue of non obstante clauses contained in Section 34(1) of the DRT Act and Section 35 of Act, two Central legislations will have primacy over State legislations are the questions which arise for determination in these appeals.

Held:

First, it concluded that the doctrine of repugnance had no application, as Article 254 of the Constitution applies only when there are two legislations under the same entry in the Concurrent List. In other words, the Court concluded that the State legislation did not become invalid to the extent it was inconsistent with the Central Act merely because of Art. 254.

Secondly, and more importantly, the Court analyzed the scope of the non-obstante clause in the RDB Act and the Securitisation Act. The Court noted that the provision that the RDB Act and the Securitisation Act would operate notwithstanding anything contained in any other law had to be interpreted in accordance with legislative intent, and that if the legislature intended it to have a limited scope, that had to be given effect to. In determining what the legislature in fact intended with these provisions, the Court observed that the State has for a long time been accorded priority in its debts and first charge over assets. The Court concluded that Parliament, when it enacted the RDB Act and the Securitisation Act, was deemed to be aware of this rule and must be presumed not to have altered it unless it did so specifically.

Issue:

The question which arises for consideration in these appeals is whether priority given to the dues payable by an employer under Section 11 of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (for short, `the EPF Act') is subject to Section 529A of the Companies Act, 1956 (for short, `the Companies Act') in terms of which the workmen's dues and debts due to secured creditors are required to be paid in priority to all other debts.

Held:

In view of what we have observed above on the interpretation of Section 11 of the EPF Act and Sections 529, 529A and 530 of the Companies Act, the judgment of the Division Bench of the Gujarat High Court, which turned on the interpretation of Section 94 of the Employees' State Insurance Act and Sections 529A and 530 of the Companies Act and on which reliance has been placed by the learned Company Judge and the Division Bench of the High Court while dismissing the applications filed by the appellant, cannot be treated as laying down the correct law.

The mere ranking of the dues of workers at par with debts due to secured creditors cannot lead to an inference that Parliament intended to create first charge in favour of the secured creditors and give priority to the debts due to secured creditors over the amount due from the employer under the EPF Act.

Issue rights of the tenants vis -a-vis rights of the secured creditors to take

possession u/s.14 of the SARFAESI Act.

Held There is no provision in section 13 of the SARFAESI Act that a lease

in respect of a secured asset shall stand determined when a secured creditor decides to take measures under section 13 of the Act without the determination of a valid lease, the possession of the tenant is lawful and such lawful possession of a tenant has to be protected by all courts and tribunals.

When an application is filed with the Chief Metropolitan

Magistrate/ the District Magistrate, an opportunity of being heard is be given to a person claiming to be the tenant as well as to the secured creditor, consistent with the principles of natural justice, and then take a decision.

Harshad Govardhan Sondakar v. IARC, April 3,

2014

If the Chief Metropolitan Magistrate or District Magistrate is satisfied that there is a valid lease created before the mortgage or there is a valid lease created after the mortgage in accordance with the requirements of section 65A of the Transfer of Property Act and that the lease has not been determined in accordance with the provisions of section 111 of the Transfer of Property Act, he cannot pass an order for delivering possession of the secured asset to the secured creditor.

But in case The DM or CMM comes to the conclusion that there is in fact no valid lease made either before creation of the mortgage or after creation of the mortgage satisfying the requirement of section 65A of the Transfer of Property Act or that even though there was a valid lease, the lease stands determined in accordance with section 111 of the Transfer of Property Act, he can pass an order for delivering possession of the secured asset to the secured creditor

therefore, there is no remedy available under Section 17 of the SARFAESI Act to the lessee to protect his lawful possession under a valid lease.

in terms of the Maharashtra Rent Control Act. and under any such Civil enactments, the civil courts has no jurisdiction to grant any stay for an any action taken under section 13 of the SARFAESI Act., for this purpose they have relied upon section 34 of the SARFAESI Act. This means, this is a reiteration of the decided law that section 34 of the SARFAESI act bars jurisdiction of civil courts.

Issue Whether a ‘protected tenant’ under The Maharashtra Rent Control

Act, 1999 (in short the ‘Rent Control Act’) can be treated as a lessee, and whether the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(in short, the ‘SARFAESI Act’) will override the provisions of the Rent Control Act

Held The provisions of the SARFAESI Act cannot override the provisions of

the Rent Control Act.

A tenant cannot be arbitrarily evicted by using the provisions of the Sarfaesi Act as that would amount to stultifying the statutory rights of protection given to the tenant.

A non obstante clause (section 35 of the SARFAESI Act )cannot be used to bulldoze the statutory rights vested on the tenants under the

Rent Control Act.

VISHAL N.KALSARIA VS. BANK OF INDIA, JANUARY 20, 2016

IS THIS INTERPRETION BECAUSE OF BAD DRAFTING OR INTERPRETION BY THE COURT ON LETTER AND NOT ON SPIRIT?

WE DISCUSS…

THANK YOU

B. GOPALAKRISHNAN

gopukrishnan2007@gmail.com

THANK YOU

gopukrishnan2007@gmail.com