Allowed

Central Bank of India v. Mallika Chainani & Ors.

DRAT7 Jul 2022REGULAR APPEAL/17/2018

Case brief

AI extract

What is this about?

The DRT allowed the appeal and set aside an order directing the handover of physical possession of secured assets to an auction purchaser. The Tribunal held that the lower authority erred in relying on a pre-reverse Supreme Court decision and restored the District Magistrate's order allowing the bank physical possession.

What did the court decide?

Impugned order dated 02.06.2017 is set aside; order of District Magistrate dated 25.04.2017 restored for handover of physical possession.

Central Bank of India versus Mallika Chainani & Ors. — Banking and Recovery | DRAT (2022)

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BEFORE THE DEBTS RECOVERY APPELLATE TRIBUNAL, AT: MUMBAI Present: Mr Justice Ashok Menon, Chairperson Appeal No. 17/2018

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Between

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Central Bank of India &Anr.

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V/s. MallikaChainani&Ors.

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… Appellant/s

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…Respondent/s

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Mr.MeghnathNavlani, Advocate for Appellants.

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-: Order dated : 07/07/2022:-

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The Respondents were called absent and set ex-parte.

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The Ld. Counsel appearing for the Appellants was heard in detail.

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The Appeal arises against the impugned order dated 02.06.2017 of the Ld. Presiding Officer, D.R.T., Pune, in S.A. No. 83/2017 in which the Ld. P.O. allowed the application filed by Respondents challenging the order of the Ld. District Magistrate dated 25.04.2017 directing the handing over of the physical possession of the secured assets to the Appellants so as to complete the auction sale which has already taken place on 18.04.2016.

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The facts and briefs are thus:

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The Appellants had issued a notice u/s 13(2) and thereafter proceeded u/s 13(4) of the SARFAESI Act. The Appellants took symbolic possession of the secured assets on 24.04.2015. Subsequently, the property

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was sold in auction on 18.04.2016 by the Authorized Officer of the Bank. Thereafter, the Appellant moved the learned District Magistrate with an application for physical possession of the property, which was allowed vide order dated 25.04.2017. The physical possession of the secured asset was directed to be handed over to the Appellants in turn to facilitate handing over the possession to the successful bidder. The borrower Respondents filed Securitization Application on 29.05.2017 challenging the order of Ld. District Magistrate challenging the propriety in directing handing over the physical possession of the property.

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The Ld. P.O. in impugned order relied upon the decision of the Hon’ble High Court of Judicature at Bombay in Blue Coast Hotels V/s IFCI Ltd (WP No. 222/2015) in which, it was observed that property could not continue to be a secured asset after the sale and that the Appellants have no authority to move and proceed for physical possession u/s 14 of SARFAESI Act as they ceased to be secured creditors.

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The Ld. Counsel appearing for the Appellant submits that the decision relied upon by the Ld. P.O. has subsequently overruled by the Hon’ble Supreme Court in ITC Limited V/s Blue Coast Hotels Limited &Ors. (2018) 15 SCC 99, wherein it has been specifically held that the creditor could maintain an application for physical possession u/s 14 of the SARFAESI Act even though it had taken over only symbolic possession prior to the sale of the property to the auction purchaser. The transfer of the secured assets by the creditor cannot be construed to be a complete

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transfer as contemplated by Sec. 8 of the Transfer of the Property Act. The creditor nevertheless had a right to take actual possession of the secured assets and must therefore be held to be a secured creditor even after the limited transfer to the auction purchaser under the agreement. Thus, the entire interest in the property not having been passed on to the creditor in the first place, the creditor in turn could not pass on the entire interest to the auction purchaser and thus remained a secured creditor in the Act. Under the circumstances, the Ld. P.O. committed an error in allowing the S.A. submits the Ld. Counsel appearing for the Appellants.

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The Ld. Counsel also draws the attention of this Tribunal to Rule 9(9) of the Security Interest (Enforcement) Rules, 2002 wherein it is stated that the Authorized Officer shall deliver the property to the purchaser free from encumbrances known to the secured creditor on deposit of money as specified in Sub-rule (7) of Rule 9. Moreover, the Ld. Counsel also argued that the D.R.T. could not have set aside the order of Ld. District Magistrate as Sec. 14(3) of SARFAESI Act specifically precludes that, and states that no act of the Chief Metropolitan Magistrate or the District Magistrate done in pursuance of Sec. 14 shall be called in question in any Court or before any authority. Under these circumstances, it is submitted that the impugned order setting aside the order of the Ld. District Magistrate to hand over possession of the secured assets is not sustainable and therefore, needs to be set aside.

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I have gone through the decision of the Hon’ble Apex Court in the matter of ITC Ltd (supra) and the law pointed out by the Ld. Counsel for the Appellants. I am in agreement with the submissions of the learned counsel for the Appellant and convinced that the order of the Ld. Presiding Officer in the S.A. cannot be sustained in view of the infirmities pointed out, and therefore, needs to be set aside.

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Therefore, the Appeal is allowed and the impugned order dated 02.06.2017 in S.A. No. 83/2017 of D.R.T. Pune is set aside and the order of District Magistrate, Pune dated 25.04.2017 is restored. The physical possession of the property shall accordingly be handed over as directed in that order dated 25.04.2017.

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Sd/Chairperson

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mks- 11

Central Bank of India v. Mallika Chainani & Ors.

Case brief

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Central Bank of India v. Mallika Chainani & Ors.

Case brief

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