AUTHORIZED OFFICER, INDIAN OVERSEAS BANK AND ANR. versus M/S. ASHOK SAW MILL

Citation: [2009] 11 S.C.R. 599 · Decided: 16-07-2009 · Supreme Court of India · Bench: ALTAMAS KABIR · Disposal: Disposed off

Cited by 3 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

.. 
•• 
[2009] 11 S.C.R. 599 
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK AND 
A 
ANR. 
v. 
MIS. ASHOK SAW MILL 
(Civil Appeal No. 4429 of 2009) 
JULY 16, 2009 
.B 
[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.] 
Securitisation and Reconstruction of Financial Assets 
and Enforcement of Security Interest Act, 2002 - s.13(4) and C 
s. 17 - Jurisdiction of Debts Recovery Tribunal (ORT) to 
interfere with the action taken by secured creditor in terms of 
s.13(4) - Held: Action taken by secured creditor in terms of 
s.13(4) is open to scrutiny and can not only be set aside but 
even the status quo ante can be restored by the ·oRT. 
D 
The present appeals arise out of action take by 
secured creditor in terms of. Section 13(4) of the 
Securitisation and Reconstruction of Financial Asse.ts 
and Enforcement of Security Interest Act, 20.02 
E 
(SARFAESI Act). 
The main question which arose for consideration in 
the present appeals was whether the Debts Recovery 
Tribunal (ORT) would have jurisdiction to consider and 
adjudicate with regard to post Section 13(4) eve.llts or 
F 
whether its scope in terms of Section 17 of the SARFAESI 
Act would be confined to the stage contemplated under 
Section 13(4). An additional question with regard to 
maintainability of the appeal also arose for consi~eration 
before this Court. 
G 
Dismissing the main appeal and on that basis 
disposing of the connected appeal, the Court 
· 
599 
H 
600 
SUPREME COURT REPORTS 
[2009] 11 S.C.R. 
A 
HELD: 1.1. While enacting the Securitisation and 
Reconstruction of Financial Assets and Enforcement of 
Security Interest Act, 2002 (SARFAESI Act), the 
Legislature was concerned with measures to regulate 
securitisation and reconstruction of financial assets and 
B enforcement of security interest. The Act enables the 
Banks and Financial Institutions to realise long-term 
assets, manage problems of liquidity, asset liability 
mismatches and improve recovery by exercising powers 
to take possession of securities, sell them and reduce 
C non-performing assets by adopting measures for 
recovery or reconstruction. The provisions of Section 13 
enable the secured creditors, such as Banks and 
Financial Institutions, not only to take possession of the 
secured assets of the borrower, but also to take over the 
0 management of the business of the borrower, including 
the right to transfer by way of lease, assignment or sale 
for realizing secured assets, subject to the conditions 
indicated in the two provisos to Clause (b) of Sub-Section 
(4) of Section 13. [Para 21] [614-G-H; 615-A-B] 
E 
1.2. In order to prevent misuse of such wide powers 
and to prevent prejudice being caused to a borrower on 
account of an error on the part of the Banks or Financial 
Institutions, certain checks and balances have been 
introduced in Section 17 which allow any person, 
F including the borrower, aggrieved by any of the measures 
referred to in Sub-Section (4) of Section 13 taken by the 
secured creditor, to make an application to the ORT 
having jurisdiction in the matter within 45 days from the 
date of such measures having taken for the reliefs 
G indicated in Sub-Section (3) thereof. [Para 22] [615-C-D] 
H 
1.3. The intention of the legislature is clear that while 
the Banks and Financial Institutions have been vested 
with stringent powers for recovery of their dues, 
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AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 601 
·. v. ASHOK SAW MILL 
" ,. 
safeguards have also been provided for rectifying any 
A 
· error or wrongful use of such powers by vesting the ORT 
with authority after conducting an adjudication into the 
matter to declare any such action invalid and also to 
restore possession even though possession may have 
been made over to the transferee. The consequences of 
B 
the authority vested in DRT under Sub-Section (3) of 
Section 17 necessarily implies that the ORT is entitled to 
question the action taken by the secured creditor and the 
.. 
transactions entered into by virtue of Section 13(4) of the 
Act. The Legislature by inc,luding Sub-Section (3) in c 
Section 17 has gone to the extent of vesting the ORT with 
a~thority to even set aside a transaction including s .. de 
rahd to resto
1re possession to the borrower in appropriate 
cases. Resultantly, the submissions advanced that the 
dRJ has no jurisdiction to deal with a post 13(4) situation, 
D 
cannot be accepted. [Para 23] [615-E-H] 
1.4: It cannot be said that the ORT had no jurisdiction 
to interfere wit

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