ITC LIMITED versus BLUE COAST HOTELS LTD. & ORS.

Citation: [2018] 5 S.C.R. 516 · Decided: 19-03-2018 · Supreme Court of India · Bench: S.A. BOBDE · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · cites 12 · see the full citation network in Lexace

Judgment (excerpt)

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SUPREME COURT REPORTS
[2018] 5 S.C.R.
    ITC LIMITED
v.
 BLUE COAST HOTELS LTD. & ORS.
(Civil Appeal Nos. 2928-2930 of 2018)
  MARCH 19, 2018
[S. A. BOBDE AND L. NAGESWARA RAO, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.13(4) – Grievance of
debtor was that after the creditor issued the notice under s.13(2),
the debtor made a representation asking for a reschedulement of
the loan which  the creditor neither considered nor communicated
the reasons for non-acceptance thereof – Whether recovery
proceedings were in breach of s.13(3A) for failure of the creditor to
reply to the representation of the debtor and for want of a reasoned
order – Held: s.13(4) envisages that if debt is classified as NPA, the
creditor may by notice in writing require the debtor to discharge his
liabilities within 60 days – After that debtor may make a
representation and creditor is then bound to consider the
representation and communicate the reasons for non-acceptance
of representation within 15 days – When debtor fails to discharge
his liability in full, the creditor may take any of the actions under
sub-section (4) which include taking over the possession of secured
assets – In the instant case, the creditor was induced by the debtor
not to take action against them through assurances and promises –
The creditor entered into negotiations for the settlement of the dues
and even accepted cheques in repayment much after the notice under
s.13(2) and after the debtor’s letter of representation – Many
opportunities were granted by the creditor to the debtor to repay
the debt which were all met by proposals for extension of time – The
debtor ignored the symbolic possession taken over by the creditor
and continued to negotiate and even gave six cheques which were
dishonoured – The debtor then gave a final letter of undertaking
agreeing that the creditor could take over possession of the assets
if the debt was not repaid – All along, the debtor’s response has
been that of seeking extension of time to pay, with the usual
unfulfilled promise of repayment – In the fact and circumstances of
[2018] 5 S.C.R. 516
                                                 516
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this case, the debtor is not entitled to the discretionary relief under
Art.226 of the Constitution which is indeed an equitable relief –
Equity – Constitution of India – Art. 226.
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s.13(3A) – Purpose of
introduction of s.13(3A) – Held: s.13(3A) was introduced with a
plain intention to introduce a pause for the creditor to rethink and
reconsider the action proposed by the debtor.
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s. 13(3A) – Whether
s.13(3A) is mandatory or directory in nature – There is no doubt
that if a reply with reasons is an integral and indispensable part of
the statutory scheme, the Courts would not excuse a departure from
it – But, on the other hand, if the reply is merely a direction and not
of substance to the scheme, the non-compliance may be excused –
The language of sub-section (3A) is 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 – There is 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 – However, in the instant case, failure to
furnish a reply to the representation is not of much significance
since the creditor undoubtedly considered the representation and
the proposal for repayment made therein and in fact granted
sufficient opportunity and time to the debtor to repay the debt without
any avail – Therefore, in the fact and circumstances of this case,
the debtor is not entitled to the discretionary relief – Interpretation
of statutes.
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002: s. 31(i) – Plea of debtor
that portion of land mortgaged by debtor as security interest
consisted of agricultural land to which s. 31(i) does not apply and,
therefore, land could not be recovered – Tenability of – Held: s.31(i)
is inte

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