KOTTAKKAL CO OPERATIVE BANK LTD Vs. BALAKRISHNAN

JUDGEMENT

(1.) On account of the first respondent s liability under a security agreement, in terms of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, hereinafter, the "Act", proceedings were initiated by the petitioner under Section 13(2) of that Act on 9-10-2005. On 15-2-2006, the petitioner, the secured creditor, took what can be called "symbolic possession" of the property leaving the first respondent in defacto physical possession. On 21-3-2006, notice of such action was published. On 27-7-2006, the property was brought to sale. It was bid by a third party. That sale was confirmed on 3-3-2007. Sale certificate was issued in favour of the auction purchaser on 2-4-2007. Thereafter, the petitioner, the secured creditor moved Ext. P1 petition on 9-5-2007 before the Chief Judicial Magistrate under Section 14(1) of the Act. The Chief Judicial Magistrate issued the impugned Ext. P2 order holding that, going by the recitals in Ext. P1, the secured creditor, the writ petitioner, had already taken possession of the secured asset under the provisions of the Act and had sold the same. Taking the view that the provisions contained in Section 14 of the Act only enables the secured creditor to seek assistance of the Court to take possession or control of the property for effecting sale it was held that such provision cannot be invoked after the petitioner had, going by its pleadings, taken possession, effected sale and issued sale certificate. It was concluded that there is, therefore, no need to take possession invoking the powers under Section 14 of the Act. However, it is also opined in the impugned Ext. P2 that, if the secured creditor had not obtained possession and only a symbolic sale was effected, it could seek the assistance of the Court under Section 14. Tying down the secured creditor, the writ petitioner, to the allegation in Ext. P2 petition that it had taken possession, the application under Section 14 was dismissed as not maintainable. Hence, this writ petition.

(2.) There is no controversy between the secured debtor and the secured creditor regarding the sequence of events narrated in the preceding paragraph. The fact that the secured debtor was not actually dispossessed and had continued to be in defacto possession even after the issuance of notice under Section 13(2), followed by publication in terms of Section 13(4)(a) read with Rule 4 of the Security Interest (Enforcement) Rules, 2002, is not disputed. The undisputed situation is that the first respondent continues to be in actual possession though publication has been made regarding dispossession. The question that arises for decision in this, context, is as to whether remedy by way of recourse to Section 14 of the Act is available to take actual possession of the secured asset from a secured debtor after completion of sale on the basis of symbolic possession taken on the basis of notice under Section 13(4) of the Act read with Rule 6 of the Rules.

(3.) In support of the writ petition, it is argued that the provision in Section 13(4)(a) is an enabling one and does not preclude symbolic possession being taken, to be followed by sale. It is pointed out that Section 13(8) provides that if the dues of the secured creditor are tendered at any time before the date fixed for sale or transfer, the secured assets shall not be sold or transferred by the secured creditor. It is further argued that the Scheme of the Rules and the Act does not preclude a sale before actual physical possession is taken. It is ultimately urged that it is only beneficial to the debtor that actual possession is permitted to continue with him even while proceedings are on, on the strength of constructive possession or symbolic possession in exercise of authority under Section 13(4) of the Act.