The Kerala High Court on 22 July 2011 in Sami Vs. Bank of India, 2011 (3) KLT 554 : 2011 (3) KLJ 646 : ILR 2011 (3) Ker. 624 : 2011 (3) KHC 414 deciding on the question whether without taking possession of the secured asset symbolically or actually by the bank in proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the borrower or anybody aggrieved by the action of the bank can file an application/appeal under section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Justice S. Siri Jagan has ruled that the very action of the financial institution in approaching the Magistrate under Section 14 itself would constitute a measure under Section 13(4), which would give rise to an aggrieved person the cause of action to resort to the remedy by way of approaching the Debt Recovery Tribunal under Section 17 of the Act.
# Section 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
“That being so, the circular issued by the Debt Recovery Tribunal to the effect that unless possession is actually taken by the financial institution, no appeal would be entertained, is clearly against the provisions of the Act and the decisions of the Supreme Court,” the judgment said.
The petitioners in these writ petitions are persons against whose properties, proceedings under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 have been initiated. Their grievance is that the Debt Recovery Tribunal is not entertaining applications/appeals despite the Banks initiating action to take possession through the Magistrate, which is a measure under Section 13(4) of the Act.
In all these writ petitions, the petitioners have not been served with any notice of possession and possession has not actually or symbolically been taken by the banks concerned. The banks have straight away approached the concerned Chief Judicial Magistrate or Additional District Magistrate, having jurisdiction under Section 14 of the Act for assistance to take possession of the respective security asset. Some of these petitioners have tried filing an application under Section 17 of the Act before the Debt Recovery Tribunal, Ernakulam. But, the registry of the Debt Recovery Tribunal refused to entertain the same on the ground that unless possession has been taken, the appeal under Section 17 is not maintainable.
According to the petitioners, the same is totally wrong, insofar as the very action of filing an application before the Chief Judicial Magistrate or the Additional District Magistrate for assistance to take possession of the secured asset, is a measure under Section 13(4), against which the application under Section 17 of the Act would lie before the Debt Recovery Tribunal. Therefore, the refusal on the part of the Debt Recovery Tribunal to entertain application under Section 17 on the ground that unless possession is taken by the financial institutions, no application under Section 17 would lie, is totally arbitrary and unsustainable, is the contention of the petitioners.
The High Court noted that although the Supreme Court has upheld the constitutional validity of the Act, it cannot be gainsaid that the Act is a very harsh legislation, which results in very disastrous consequences to the owner of the property against which a measure under Section 13(4) of the Act has been taken. That being so, the provisions regarding the remedies provided for persons aggrieved by such action should be construed liberally. No doubt, the Supreme Court has categorically held that no application/appeal would lie against any action taken by the financial institution prior to taking a measure under Section 13(4). Therefore, the right to resort to remedies under Section 17 would arise only when any one of the measures contemplated under Section 13 (4) or thereafter is initiated.
The Court opinioned that it is not necessary for an aggrieved person to wait till actual or symbolic possession is taken by the financial institution before resorting to the remedy as provided under Section 17.