K.S. Radhakrishnan, J.@mdashWhether permission of the Debt Recovery Tribunal is a pre requisite for a Bank or Financial Institution to invoke the provisions of Section 13B of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short "Securitisation Act") after the insertion of the proviso to Section 19 of the Enforcement of Security Interests and Recovery of Debts Laws Amendment Act, 2004, is the question that has come up for consideration in this case.
2. Bank of India, respondent herein, filed O.A.No. 318 of 2001 before the Debt Recovery Tribunal on 23.11.2001 for realisation of an amount of Rs. 4,81,92,595.74 from the writ petitioners and others jointly, severally and personally together with interest at 18% per annum with quarterly rests from 23.11.2001 till date of payment and also for costs of the proceeding. While the O.A. was pending, the Bank invoked the provisions of Section 13(2) of the Securitisation Act vide notice dated 23.1.2004 informing them that an amount of Rs. 6,33,65,539/- is outstanding and that the said amount is secured by equitable mortgage of 225 cents of landed property in survey numbers 2073/11/2/1, 2073/11A/2/21 of Pallickal Village. Petitioners and others were informed that they have defaulted repayment of debts to the Bank and the Bank has classified their account as non performing account with effect from 30.9.1999. Petitioners were therefore directed to remit the amount with interest at quarterly rests within a period of sixty days from the date of notice failing which they have been informed that the Bank would take further steps in accordance with the Securitisation Act. Writ petitioners did not comply with the demand. Consequently the Bank took possession of the property mentioned in the notice in exercise of the powers conferred on the Bank u/s 13(4) of the Act read with Rule 9 of the Rules, on 22.2.2004. Later District Collector also passed an order on 24.4.2005 with the certificate that the land mentioned in the Collector''s notice was already taken possession.
3. Writ petitioners aggrieved by those notices have approached this Court seeking a writ of certiorari to quash Exts.P3 and P4 notices and for a direction to the Bank not to take any action under the provisions of the Securitisation Act without permission of the Debt Recovery Tribunal as contemplated u/s 19 of the Recovery of Debts due to Banks and Financial Institutions Act, 1993 (for short RDB Act) and also for other consequential reliefs.
4. First and second respondents have filed a detailed counter affidavit submitting that the proviso added to Section 19 of the RDB Act would not be a bar in initiating action u/s 13(2) of Securitisation Act. Proviso to Section 19 only enables the Bank to seek permission of the Debt Recovery Tribunal to withdraw the application if no action has been taken under the Securitisation Act. Even if the application is not withdrawn, there is no bar in initiating action under the Securitisation Act. Further it is also stated that Section 37 of the Securitisation Act makes it clear that provisions of the Act are in addition to the RDB Act and therefore both the Acts are supplementary to each other and exclusive to each other. Further it is also stated that Ext.P2 notice u/s 13 was issued as early as on 23.1.2004 whereas the amendment Act came into force only on 11.11.2004. It is also stated in the counter affidavit that the writ petitioner has got an effective alternate remedy against Ext.P4 notice issued u/s 17 of the Securitisation Act.
5. Learned single Judge found no reason to examine the question of law raised and relegated the writ petitioner to the remedy available u/s 17 of the Securitisation Act
6. Counsel appearing for the appellant Sri Sreelal N. Warrier submitted that the question raised by the petitioner is a pure question of law and therefore the Writ Petition is perfectly maintainable. Counsel submitted that after the introduction of the proviso to the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 with effect from 11.11.2004 unless and until permission is obtained from the Debt Recovery Tribunal, Bank or Financial Institution cannot invoke the provisions of the Securitisation Act, Counsel submitted that the proviso to Section 19 disentitles the Bank to initiate any action under the Securitisation Act without complying with the requirements of the proviso and without withdrawing the application pending before the Debt Recovery Tribunal.
7. Counsel appearing for the first respondent Sri Devan Ramachandran, on the other hand, contended that the proviso to Section 19 of the RDB Act is only a procedural provision which cannot take away substantive right of the Bank to initiate action under the Securitisation Act. In any view of the matter, counsel submitted that the Bank has already invoked the provisions of the Securitisation Act with notice u/s 13 dated 23.1.2004 and the amendment came into force only on 11.11.2004 with prospective operation.
8. Validity of the Securitisation Act was challenged before the Apex Court in
As discussed earlier as well, it may be observed that though the transaction may have the character of a private contract yet the question of great importance behind such transaction as a whole having far reaching effect on individual transactions, more particularly when financing is through banks and financial institutions utilizing the money at the disposal of the financial institutions. Therefore, wherever public interest to such a large extent is involved and it may become necessary to achieve an object which serves the public purposes, individual rights may have to give way. Public interest has always been considered to be above the private interest. Interest of an individual may, to some extent, be affected but it cannot have the potential of taking over the public interest having an impact on the socio economic drive of the country....
In the present case we find that the unrealized dues of banking companies and financial institutions utilizing public money for advances were mounting and it was considered imperative in view of recommendations of Expert Committees to have such law which may provide speedier remedy before any major fiscal setback occurs and for improvement of general financial flow of money necessary for the economy of the country the impugned Act was enacted. Undoubtedly, such a legislation would be in the public interest and the individual interest shall be subservient to it.
Apex Court also noticed that the party affected by the proceedings effected under the Securitisation Act has also got remedy u/s 17 of the RDB Act before the Debt Recovery Tribunal. Therefore it is felt that borrowers will get a reasonably fair deal and opportunity to get the matter adjudicated upon before Debts Recovery Tribunal, The effect of some of the provisions may be a bit harsh for some of the borrowers but on that ground the impugned provisions of the Act cannot be said to be unconstitutional in view of the fact that the object of the Act is to achieve speedier recovery of the dues as non performing assets and better availability of capital liquidity and resources to help in growth of economy of the country and welfare of the people in general which would subserve the public interest.
9. The fact that the Bank or Financial Institution could invoke the provisions of the Securitisation Act vis-a-vis the RDB Act cannot be disputed. The only question to be considered is whether after the coming into force of the Enforcement of Security Interests and Recovery of Debts Laws Amendment Act 2004, with effect from 11.11.2004 permission from the Debt Recovery Tribunal is a pre condition for invoking the provisions of the Securitisation Act. Section 37 of the Securitisation Act states that the provisions of the Act or the Rules made thereunder shall be in addition to and not in derogation of the provisions of the RDB Act or in any other law for the time being in force. A Division Bench of this Court in Surendranathan v. Kerala Financial Corporation (1988 (2) KLT 186) held that it is not the law that there can be only one remedy available for recovery of loans, advances-etc. from defaulters namely, recourse through the ordinary courts of land. Any statute may in appropriate cases provide for more than one remedy against the same defaulter for recovery of the dues or it may be, that relief for recovery is provided in different enactments. Special remedies may be available in favour of or against particular classes of persons. When these two statutory remedies are available against the same defaulter, the power so conferred under the statute is not arbitrary where there are guidelines to control the discretion to be exercised.
10. We are of the view unless there is a specific bar against the Bank in invoking the provisions of the Securitisation Act, the pendency of the proceeding under the RDB Act is of no consequence. But contention was raised that by virtue of the proviso introduced by the amendment Act that unless and until permission of the Debt Recovery Tribunal is obtained, Banks or Financial Institutions cannot invoke the provisions of the Securitisation Act. In this connection we may extract Section 19(1), as amended by Act 54 of 2004 for easy reference.
19. Application to the Tribunal--
(1) Where a bank or a financial institution has to recover any debt from any person, it may make an application to the Tribunal within the local limits of whose jurisdiction,-
(a) the defendant, or each of the defendants where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain, or
(b) any of the defendants, where there are more than one, at the time of making the application, actually and voluntarily resides, or carries on business, or personally works for gain; or
(c) the cause of action, wholly or in part, arises:
Provided that the bank or financial institution may, with the permission of the Debts Recovery Tribunal, on an application made by it, withdraw the application, whether made before or after the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), if no such action had been taken earlier under that Act:
Provided further that any application made under the first proviso for seeking permission from the Debts Recovery Tribunal to withdraw the application made under Sub-section (1) shall be dealt with by it as expeditiously as possible and disposed of within thirty days from the date of such application:
Provided also that in case the Debts Recovery Tribunal refuses to grant permission for withdrawal of the application filed under this sub-section, it shall pass such orders after recording the reasons therefor.
Section 19 appears in Chapter IV of the RDB Act which deals with the procedure of Tribunals. Section 19(1) lays down the procedure with regard to the manner in which application is to be submitted before the Tribunal for recovery of any debt from any person. It also indicates the local limits or jurisdiction of the Tribunals. Various other clauses of Section 19 lay down the procedure as to how the Tribunal has to act once the application is received by it. It also lays down the procedure enabling the defendants to claim set off and also other incidental reliefs. In other words, Section 19 is not a substantive provision but only a procedural provision. Proviso was added by amendment Act 2004 only to appraise the Tribunal of the intention of the Bank or Financial Institution to invoke the provisions of the Securitisation Act. It is not mandatory on the part of the Bank or Financial Institution to make an application before the Tribunal or to seek permission before invoking the provisions of the Securitisation Act. The power conferred on the Tribunal under the third proviso to Section 19(1)(c) is only to refuse or grant permission for withdrawal. No power is conferred on the Tribunal under the RDB Act to prevent the Bank or Financial Institution from invoking the provisions of the Securitisation Act. Only power conferred on the Tribunal is to decide as to whether the request for withdrawal of the application pending before the Tribunal could be granted or not.
11. The Central Government in exercise of the powers conferred u/s 3 established Tribunals which could exercise jurisdiction, powers and authority conferred on such Tribunal under the Act to refuse permission to the Bank to invoke the provisions of the Securitisation Act. Only power conferred on the Tribunal is to grant or refuse permission to withdraw the application pending before it. If the Tribunal refuses to grant permission for withdrawal it can record reasons for the same and proceed with the application, that is the only power conferred on the Tribunal. Tribunal is the creature of the statute, which can exercise powers only which have been specifically conferred. We are therefore of the view that before the Amendment Act 2004 or after no permission of the Tribunal is necessary for the Bank or Financial Institution to invoke the provisions of the Securitisation Act. We therefore find no illegality in Ext P2 notice issued u/s 13 as well as Ext P3 notice issued under Rule 9(1) of the Rules 2004.
12. Learned single Judge has also quashed Ext. P4 for which Bank has no grievance. The Writ Appeal therefore lacks merits and the same is dismissed.
