M/S HINDON FORGE PVT. LTD. & ANR. versus THE STATE OF UTTAR PRADESH THROUGH DISTRICT MAGISTRATE GHAZIABAD & ANR.

Citation: [2018] 11 S.C.R. 1019 · Decided: 01-11-2018 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Leave Granted & Allowed

Cited by 2 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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1019
M/S HINDON FORGE PVT. LTD. & ANR.
v.
THE STATE OF UTTAR PRADESH THROUGH DISTRICT
MAGISTRATE GHAZIABAD & ANR.
(Civil Appeal No. 10873 of  2018)
NOVEMBER 01, 2018
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Securities Interest Act, 2002: s.17(1) – Whether an
application under s.17(1) of the SARFAESI Act at the instance of a
borrower, is maintainable even before physical or actual possession
of secured assets is taken by banks/financial institutions in exercise
of their powers under s.13(4) of the Act r/w r.8 of the  Rules, 2002
– Held: The scheme of s.13(4) r/w r.8(1) makes it clear that the
delivery of a possession notice together with affixation on the
property and publication is one mode of taking “possession” under
s.13(4) – Once possession is taken under rr.8(1) and 8(2)
r/w s.13(4)(a), s.17 gets attracted, as this is one of the measures
referred to in s.13(4) that is taken by the secured creditor under
Chapter III – Thus, borrower/debtor can approach the Debts
Recovery Tribunal under s.17 of the Act at the stage of the possession
notice referred to in rr. 8(1) and 8(2) of the 2002 Rules – Security
Interest (Enforcement) Rules, 2002 – rr.8(1) and 8(2).
Allowing the appeals, the Court
HELD: 1.1 A reading of section 13 would make it clear
that where a default in repayment of a secured debt or any
instalment thereof is made by a borrower, the secured creditor
may require the borrower, by notice in writing, to discharge in
full his liabilities to the secured creditor within 60 days from the
date of notice. It is only when the borrower fails to do so that the
secured creditor may have recourse to the provisions contained
in section 13(4) of the Act. [Para 10]  [1054-B-C]
Mardia Chemicals Ltd. v. Union of India (2004) 4 SCC
311 : [2004] 3 SCR 982 – relied on.
1019
[2018] 11 S.C.R. 1019
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1020
SUPREME COURT REPORTS
[2018] 11 S.C.R.
1.2 Rule 8(1) makes it clear that “the authorised officer
shall take or cause to be taken possession”.  The expression
“cause to be taken” only means that the authorised officer need
not himself take possession, but may, for example, appoint an
agent to do so. What is important is that such taking of possession
is effected under sub-rule (1) of rule 8 by delivering a possession
notice prepared in accordance with Appendix IV of the 2002 Rules,
and by affixing such notice on the outer door or any other
conspicuous place of the property concerned. Under sub-rule (2),
such notice shall also be published within 7 days from the date of
such taking of possession in two leading newspapers, one in the
vernacular language having sufficient circulation in the locality.
Appendix IV provides the format of possession notice wherein
the borrower in particular, and the public in general is cautioned
by the said possession notice not to deal with the property as
possession of the said property has been taken. From this stage
on, the secured asset is liable to be sold to realise the debt owed,
and title in the asset is divested from the borrower and complete
title given to the purchaser, as is mentioned in section 13(6) of
the Act. There is, thus, a radical change in the borrower dealing
with the secured asset from this stage. At the stage of a section
13(2) notice, section 13(13) interdicts the borrower’s from
transferring the secured asset (otherwise than in the ordinary
course of his business) without the prior written consent of the
secured creditor. But once possession notice is given under rule
8(1) and 8(2) by the secured creditor to the borrower, the borrower
cannot deal with the secured asset at all as all further steps to
realise the same are to be taken by the secured creditor under
the 2002 Rules. [Para 11]  [1054-E-H; 1055-A-B]
1.3 The scheme of section 13(4) read with rule 8(1)
therefore makes it clear that the delivery of a possession notice
together with affixation on the property and publication is one
mode of taking “possession” under section 13(4).  This being
the case, it is clear that section 13(6) kicks in as soon as this is
done as the expression used in section 13(6) is “after taking
possession”. Also, it is clear that rule 8(5) to 8(8) also kick in as
soon as “possession” is taken under rule 8(1) and 8(2). The
statutory scheme, therefore, in the present case is that once
possession is taken under rule 8(1) and 8(2) read with section
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13(4)(a), section 17 gets attracte

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