REPORTABLE  IN THE SUPREME COURT OF INDIA

CRIMINAL APPELLATE JURISDICTION

CRIMINAL APPEAL NOS.  338-340             OF 2011 (Arising out of S.L.P. (Crl.) Nos.4436-4438 of 2009)

KANAIYALAL LALCHAND SACHDEV &  ORS.

— APPELLANTS

VERSUS

STATE OF MAHARASHTRA & ORS. — RESPONDENTS

J U D G M E N T  

D.K. JAIN, J.:

Leave granted.

2. Challenge  in  these  appeals,  by  special  leave,  is  to  the  judgments  and  

orders dated 28th April,  2009 and 1st July, 2009 delivered by the High  

Court of Bombay in W.P. No. 707 of 2009, and Criminal Application No.  

178  of  2009  in  W.P.  No.  707  of  2009,  respectively  whereby  it  has  

dismissed  the  writ  petition  filed  by  the  appellants  herein,  and  also  

declined to extend the status-quo order granted by it to them.  

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3. Briefly stated, the facts, material for adjudication of the present appeals,  

may be stated thus:

Respondent No. 3, viz. the State Bank of India had advanced a loan of  

`4,50,00,000/- to appellant No. 6 on an equitable mortgage by deposit of the  

title  deeds  of  certain  properties,  subject  matter  of  these  appeals,  on  6th  

February, 2006.  Appellant Nos.1 to 5 and one Mr. Lalchand Sachdeo stood  

as personal guarantors to the said loan.  

4. On default  of  re-payment  of  loan  amount,  respondent  No.  3  issued  a  

notice under the Securitisation and Reconstruction of Financial  Assets  

and Enforcement of Security Interest (Second) Ordinance, 2002 on 18th  

November, 2006. On 12th  February, 2007, the officers of respondent No.  

3 dispossessed the appellants of one of the secured properties viz. T-125,  

CTS,  No.  1729.  Being  aggrieved,  the  appellants  filed  a  writ  petition  

being CRL. W.P.       No.286 of 2007 before the Bombay High Court,  

inter-alia,  contending that  the  notice  issued by respondent  No.  3  was  

illegal, no action could be taken in pursuance thereof, and if at all, the  

respondent wanted to take any action, it  was required to approach the  

Chief Metropolitan Magistrate under Section 14 of the Securitisation and  

Reconstruction of Financial Assets and Enforcement of Security Interest  

Act, 2002 (for short “the Act”).  

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5. Before the High Court, respondent No. 3 offered to withdraw the notice  

dated  18th November,  2006  without  prejudice  to  the  rights  and  

contentions advanced by them, and to return the possession of the said  

property to the appellants, subject to the appellants and all adult members  

furnishing  an  undertaking  to  the  effect  that  they  shall  not  alienate,  

encumber, transfer, dispose of and/or create any third party interest in the  

said premises for a period of six months. Accepting the statement made  

on behalf of  respondent No. 3, the High Court dismissed the writ petition  

vide order dated 7th March, 2007.

6. Thereafter, on 11th April, 2007 respondent No. 3 issued to the appellants  

a notice under Section 13(2) of the Act. The appellants replied to the said  

notice on 23rd May, 2007. Vide letter dated 29th May, 2007, respondent  

No.  3,  communicated  its  reasons  for  not  accepting  the  reply.  

Subsequently,  respondent  No.  3  issued a  public  notice  in newspapers,  

informing the appellants of the issuance of notice under Section 13(2) of  

the Act.  

7. In pursuance thereof, respondent No.3, filed C.C. No. 223/M/2008 before  

the Chief Metropolitan Magistrate under Section 14 of the Act for taking  

possession of the secured assets. Vide order dated 3rd February, 2009, the  

Magistrate  allowed  the  said  application  and  directed  the  Assistant  

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Registrar, Kurla Centre of Courts, to take possession of the mortgaged  

properties after issuing notice to the appellants.  

8.  Vide notice dated 27th February, 2009, the Assistant Registrar, directed  

the appellants to hand over the possession of the mortgaged properties to  

respondent No. 3 within 15 days from the receipt of the said notice. At  

this juncture, it would be expedient to  extract the  relevant portions of  

the said notice:

“Whereas,  the  Chief  Metropolitan  Magistrate,  Esplanade,  Mumbai  has  passed  the  following  order  on  3.2.2009  on  the  application  filed  before  him by  State  Bank  of  India,  Mazda  Complex,  Parsi  Agari  Lane,  Thana  (W)  400601  through  its  Authorized Officer Fazlur Rehman Sheikh.

ORDER

The  Application  is  allowed.  Asst.  Registrar,  Mr.  P.A.  Tendolkar, Kurla Centre of Court after issuing notice of taking  possession  of  the  secured  assets……………………………… ………………………………………………………………… ………………………………………………………………… …………………………”

It is manifest from a bare perusal of the said notice that the order passed by  

the  Magistrate  dated 3rd February,  2009 was referred to  by the  Assistant  

Registrar in his notice.  

9. Being  aggrieved  by  the  said  notice,  the  appellants  herein  again  

approached the High Court. As afore-stated, the High Court dismissed  

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the said writ petition, vide order dated 28th April, 2009, on the ground  

that an alternative remedy was available to the appellants under Section  

17 of the Act. Nevertheless, the High Court directed the respondents to  

maintain status quo in the matter for a period of 10 weeks from the date  

of  its  order,  so  as  to  enable  the  appellants  to  approach  the  Debts  

Recovery Tribunal (for short the “DRT”) under Section 17 of the Act.

10. Thereafter, the appellants filed Criminal Application No. 178 of 2009 in  

W.P.  No.  707 of  2009 seeking  an extension  of  the  status  quo period  

granted vide order dated 28th April, 2009. As afore-stated, the High Court  

rejected the said application filed by the appellants.

11.Hence, the present appeals against both the said orders.  

12.Ms. Kranti Anand, learned counsel appearing on behalf of the appellants,  

while assailing the impugned orders, strenuously urged that apart from  

the fact that the notice issued by the Assistant Registrar was vague, it was  

never served on the appellants. In fact, appellants received a copy of the  

order of the Magistrate during the proceedings before the High Court,  

pleaded the learned counsel. Learned counsel also urged that the notice  

issued  by  the  Assistant  Registrar  was  vitiated  on  account  of  non-

compliance  with  Rule 8  of  the  Security  Interest  (Enforcement)  Rules,  

2002 (for short “the 2002 Rules”) as well. It was argued that the High  

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Court had also erred in equating action under Section14 of the Act with  

action under Section 13(4)(a) of the Act.  It was thus, asserted that for all  

these reasons, the impugned orders deserve to be set aside.

13. Per contra,  Mr. Buddy A. Ranganadhan, learned counsel appearing on  

behalf of respondent No.3—Bank, supporting the impugned judgments,  

contended that in light of the decision of this  Court in  Transcore  Vs.   

Union of  India & Anr.1,  no fault  could be found with the  impugned  

judgments. It was also urged that the appellants having already availed of  

the remedy of approaching the DRT, they are estopped from challenging  

the decision of the High Court.  

14. Mr. Sushil Karanjakar, learned counsel appearing on behalf of the State  

of Maharashtra contended that Rule 8 of the 2002 Rules was inapplicable  

in the instant case,  in as much as it  deals with sale of secured assets.  

According to the learned counsel, it was Rule 4 which was applicable to  

the  facts  of  the  instant  case.   In  support,  reliance  was  placed  on the  

decision of this Court in  Mardia Chemicals Ltd. & Ors.  Vs.  Union of  

India & Ors.2.

15. Having bestowed our anxious consideration to the facts at hand, we are  

of the opinion that the appeals are utterly misconceived.   1 (2008) 1 SCC 125 2 (2004) 4 SCC 311

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16. Section  13  of  the  Act  deals  with  enforcement  of  security  interest,  

providing that notwithstanding anything contained in Sections 69 or 69A  

of the Transfer of Property Act,  1882, any security interest  created in  

favour  of  any  secured  creditor  may  be  enforced,  without  the  court’s  

intervention, by such creditor in accordance with the provisions of the  

Act.  Section 13(2)  of  the  Act provides  that  when a  borrower,  who is  

under a liability to a secured creditor, makes any default in repayment of  

secured debt, and his account in respect of such debt is classified as non-

performing asset, then the secured creditor may require the borrower, by  

notice in writing, to discharge his liabilities within sixty days from the  

date of the notice, failing which the secured creditor shall be entitled to  

exercise all or any of the rights given in Section 13(4) of the Act. Section  

13(3) of the Act provides that the notice under Section 13(2) of the Act  

shall  give  details  of  the  amount  payable  by  the  borrower  as  also  the  

details of the secured assets intended to be enforced by the bank. Section  

13(3-A) of the Act was inserted by Act 30 of 2004 after the decision of  

this  Court  in  Mardia  Chemicals  (supra),  and  provides  for  a  last  

opportunity  for  the  borrower  to  make  a  representation  to  the  secured  

creditor  against  the  classification  of  his  account  as  a  non-performing  

asset. The secured creditor is required to consider the representation of  

the borrowers, and if the secured creditor comes to the conclusion that  

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the  representation  is  not  tenable  or  acceptable,  then  he  must  

communicate, within one week of the receipt of the communication by  

the borrower, the reasons for rejecting the same. Section 13(4) of the Act  

provides that  if  the borrower fails  to discharge his liability within the  

period specified in  Section 13(2),  then the secured creditor,  may take  

recourse to any of the following actions, to recover his debt, namely-

“(a)  take  possession  of  the  secured  assets  of  the  borrower  including the right to transfer by way of lease, assignment or  sale for realising the secured asset;

(b) take over the management of the business of the borrower  including the right to transfer by way of lease, assignment or  sale for realising the secured asset:

Provided that the right to transfer by way of lease, assignment  or sale shall be exercised only where the substantial part of the  business of the borrower is held as security for the debt:

Provided further that where the management of whole, of the  business  or  part  of  the  business  is  severable,  the  secured  creditor shall take over the management of such business of the  borrower which is relatable to the security for the debt;

(c) appoint any person (hereafter referred to as the manager), to  manage the secured assets  the  possession of  which has been  taken over by the secured creditor;

(d) require at any time by notice in writing, any person who  has acquired any of the secured assets from the borrower and  from  whom  any  money  is  due  or  may  become  due  to  the  borrower, to pay the secured creditor, so much of the money as  is sufficient to pay the secured debt.”

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Section  14  of  the  Act  provides  that  the  secured  creditor  can  file  an  

application  before  the  Chief  Metropolitan  Magistrate  or  the  District  

Magistrate, within whose jurisdiction, the secured asset or other documents  

relating thereto are found for taking possession thereof. If any such request  

is made, the Chief Metropolitan Magistrate or the District Magistrate, as the  

case may be, is obliged to take possession of such asset or document and  

forward the same to the secured creditor. (See:  United Bank of India  Vs.   

Satyawati  Tondon & Ors.3).  Therefore,  it  follows that  a secured creditor  

may, in order to enforce his rights under Section 13(4), in particular Section  

13(4)(a), may take recourse to Section 14 of the Act.

17.Section 17 of the Act which provides for an appeal to the DRT, reads as  

follows:

“17.  Right to appeal.—(1) Any person (including borrower),  aggrieved by any of the measures referred to in sub-section (4)  of Section 13 taken by the secured creditor or his authorised  officer under this Chapter, may make an application along with  such fee, as may be prescribed to the Debts Recovery Tribunal  having jurisdiction in the matter within forty-five days from the  date on which such measures had been taken:

Provided that different fees may be prescribed for making the  application  by  the  borrower  and  the  person  other  than  the  borrower.

Explanation.—For the removal of doubts it is hereby declared  that the communication of the reasons to the borrower by the  secured creditor for not having accepted his representation or  

3 (2010) 8 SCC 110

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objection or the likely action of the secured creditor at the stage  of communication of reasons to the borrower shall not entitle  the person (including borrower) to make an application to the  Debts Recovery Tribunal under sub-section (1) of Section 17.

(2) The Debts Recovery Tribunal shall consider whether any of  the measures referred to in sub-section (4) of Section 13 taken  by  the  secured  creditor  for  enforcement  of  security  are  in  accordance with the provisions of this Act and the rules made  thereunder.”

18.The 2002 Rules,  enacted under sub-section (1)  and clause (b) of  sub-

section (2)  of  Section 38 read with sub-sections (4),  (10)  and (12) of  

Section 13 of the Act, set down the procedure for enforcing a security  

interest. Rule 4 of the 2002 Rules deals with the possession of movable  

assets, whereas Rule 8 deals with the possession of immoveable assets. It  

is manifest that Rule 4 has no application to the facts of the instant case,  

as contended by the learned counsel for the State.  

19. In  Authorised Officer, Indian Overseas Bank & Anr.  Vs.  Ashok Saw  

Mill4,  the main question which fell  for determination was whether the  

DRT would  have  jurisdiction  to  consider  and adjudicate  post  Section  

13(4) events or whether its scope in terms of Section 17 of the Act will  

be confined to the stage contemplated under Section 13(4) of the Act?  

On an examination of the provisions contained in Chapter III of the Act,  

in particular Sections 13 and 17, this Court, held as under :

4 (2009) 8 SCC 366

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“35. 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, 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  DRT  having jurisdiction in the matter within 45 days from the date of  such  measures  having  taken  for  the  reliefs  indicated  in  sub- section (3) thereof.

36. The intention of the legislature is, therefore, clear that while  the  banks  and  financial  institutions  have  been  vested  with  stringent  powers  for  recovery  of  their  dues,  safeguards  have  also been provided for rectifying any error or wrongful use of  such  powers  by  vesting  the  DRT  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. …………………………………………………………………..

39. We are unable to agree with or accept the submissions made  on behalf of the appellants that the DRT had no jurisdiction to  interfere with the action taken by the secured creditor after the  stage contemplated under Section 13(4) of the Act. On the other  hand, the law is otherwise and it contemplates that the action  taken by a secured creditor in terms of Section 13(4) is open to  scrutiny and cannot only be set aside but even the status quo  ante can be restored by the DRT.”

(Emphasis supplied by us)

20.We are in respectful agreement with the above enunciation of law on the  

point. It is manifest that an action under Section 14 of the Act constitutes  

an action taken after the stage of Section 13(4), and therefore, the same  

would fall within the ambit of Section 17(1) of the Act.  Thus, the Act  

itself contemplates an efficacious remedy for the borrower or any person  

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affected by an action under Section 13(4) of the Act, by providing for an  

appeal before the DRT.

21. In our opinion, therefore, the High Court rightly dismissed the petition on  

the  ground that  an efficacious  remedy was available  to  the appellants  

under Section 17 of the Act. It is well-settled that ordinarily relief under  

Articles  226/227  of  the  Constitution  of  India  is  not  available  if  an  

efficacious alternative remedy is available to any aggrieved person. (See:  

Sadhana Lodh  Vs.  National Insurance Co. Ltd. & Anr.5; Surya Dev  

Rai  Vs.  Ram Chander  Rai  & Ors.6;  State  Bank of  India  Vs.  Allied  

Chemical Laboratories & Anr.7).   In City and Industrial Development   

Corporation Vs. Dosu Aardeshir Bhiwandiwala & Ors.8, this Court had  

observed that:

“The Court while exercising its jurisdiction under Article 226 is  duty-bound to consider whether:

(a)  adjudication  of  writ  petition  involves  any  complex  and  disputed  questions  of  facts  and  whether  they  can  be  satisfactorily resolved;

(b) the petition reveals all material facts;

(c) the petitioner has any alternative or effective remedy for the  resolution of the dispute;

5 (2003) 3 SCC 524 6 (2003) 6 SCC 675 7 (2006) 9 SCC 252 8 (2009) 1 SCC 168

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(d)  person  invoking  the  jurisdiction  is  guilty  of  unexplained  delay and laches;

(e)  ex facie barred by any laws of limitation;

(f) grant of relief is against public policy or barred by any valid  law; and host of other factors.”

22.In the instant case, apart from the fact that admittedly certain disputed  

questions of fact  viz.  non-receipt  of notice under Section 13(2) of the  

Act, non-communication of the order of the Chief Judicial Magistrate etc.  

are involved, an efficacious statutory remedy of appeal under Section 17  

of the Act was available to the appellants, who ultimately availed of the  

same.  Therefore,  having regard to  the facts  obtaining in the  case,  the  

High Court  was  fully  justified  in  declining to  exercise  its  jurisdiction  

under Articles 226 and 227 of the Constitution.  

23. For the foregoing reasons,  the impugned judgments  cannot be flawed,  

warranting interference by this Court.  Accordingly, the appeals, being  

devoid of any merit, are dismissed with costs, quantified at `20,000/-.  

.……………………………………               (D.K. JAIN, J.)  

                             .…………………………………….              (H.L. DATTU, J.)

NEW DELHI;

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FEBRUARY 7, 2011. ARS

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