w w w . L a w y e r S e r v i c e s . i n



Indusind Bank Ltd. v/s Deva Tools & Forgings

    Decided On, 23 December 2004

    At, Debts Recovery Appealate Tribunal at Delhi

    By, THE HONOURABLE MR. JUSTICE K. KUMARAN

    For the Appearing Parties: ---------.



Judgment Text

1. These are appeals arising from the orders of the Debts Recovery Tribunal either granting stay of further proceedings to be taken by the Banks/financial institutions concerned, or refusing to slay such proceedings to be taken in pursuance of a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as "the Securitisation Act').

2. M/s. Krisha & Co. and others had filed Miscellaneous Appeal 272/2002 on the file of this Tribunal against Indian Overseas Bank. They had also filed Miscellaneous Application for stay. In that appeal and the application I had permitted the Secretary of the DRAT Bar Association to publish notices in the Notice Boards of the DRAT and DRT Bar Associations, Delhi informing that any Counsel who is desirous of advancing arguments and assisting this Tribunal regarding the questions raised in that appeal, including the question whether the Banks and financial institutions concerned are entitled to take recourse to the provisions of the Securitisation Act in spite of the fact that the proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as 'the Act of 1993') have been taken and decided or are pending, may seek leave of this Tribunal for addressing arguments.

3. Subsequently the said Miscellaneous Appeal 272/2002 was compromised, and was disposed of as withdrawn, but while permitting the appellants therein to withdraw the Miscellaneous Appeal 272/2002 and Miscellaneous Application 16/2003, this Tribunal has ordered that the question referred to above will be considered for decision in the other appeals like Miscellaneous Appeals 72/2003, 122/2004, 141/2004, etc.

4. Accordingly, I took up these questions for consideration in Miscellaneous Appeal 72/2003 and others appeals referred to in the cause title.

5. I have taken up for consideration only the questions of law raised in these appeals for consideration inasmuch as the same have arisen and are likely to arise in several matters. After the decision on the questions of law raised and decided in these matters, the appeals will have to be individually taken up, considered and decided, since there may be difference on facts arising for consideration in these appeals and the other appeals in the light of the decision taken.

6. I have permitted those learned Counsel also who wanted to address this Tribunal as amicus curiae to address arguments to assist the Tribunal.

7. I have heard the Counsel for the parties in these appeals and also Mr. H.C. Dhall, Mr. Navin Pushkarna, Mr. I.P. Singh, Mr. M. Dutta, Mr. B.S. Nagar, Mr. S.L. Gupta, Mr. Sanjay Bhatt, Mr. Tanveer Ahmed, Mr. M.U. Khan, Mr. S.K. Pruthi, Mr. Rajeeve Mehra, Mr. Sanjeev Bhandari, Mr. R.K. Trakru, Mr. R.P. Vats, and also perused the records.

8. Miscellaneous Appeal 72/2003 has been filed against the order dated 30.5.2005 passed by the Debts Recovery Tribunal, Chandigarh in Application 2279 dated 2.5.2003 in O.A. 55/2003 allowing the request of the defendants to grant stay of further proceedings in pursuance of the notice under Section 13(2) of the Securitisation Act. The defendants had urged that the Bank is simultaneously pursuing two remedies against the defendants one by way of the above said O.A. and the other under the Securitisation Act, which according to them amounts to exposing them to 'Double Jeopardy' and is, therefore, not permissible. The DRT passed the impugned order restraining the appellant Bank from taking further action in pursuance of the notice under Section 13(2) of the Securitisation Act till decision of the issue by this Tribunal as to whether action under the above said Section 13(2) can be taken or not when cases arc pending. Aggrieved, the Bank has presented the appeal.

9. The other appeals referred to in the cause title have been filed by parties who are aggrieved by the order of DRT declining their request to grant stay of further proceedings in pursuance of the notice issued by the Bank under Section 13(2) of the Securitisation Act.

10. The learned Counsel who addressed this Tribunal referred to various provisions of the Securitisation Act in detail, especially, to the provisions of Sections 13, 35 and 37 of the Securitisation Act. I have reproduced the provisions of Sections 35 and 37 at a later stage. Sections 13(1) to (4) reads as follows: "Enforcement of security interest.-(1) Notwithstanding anything contained in Section 69 or Section 69-A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any secured creditor may be enforced, without the intervention of the Court or Tribunal, by such creditor in accordance with the provisions of this Act.

(2) Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the right under Sub-section (4).

(3) The notice referred to in Sub-section (2) shall give details of the amount payable by the borrower and the secured assets intended to be enforced by the secured creditor in the event of non-payment of secured debts by the borrower.

(4) In case the borrower fails to discharge his liability in full within the period specified in Sub-section (2), the secured creditor may take recourse to one or more of the following measures to recover his secured 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 secured assets of the borrower including the right to transfer by way of lease, assignment or sale and realise the secured asset; (c) appoint any person (hereinafter 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." Some of the Counsel who addressed this Tribunal as amicus curiae pointed out that Section 13 of the Securitisation Act enables the Banks and financial institutions to enforce the security interest for the purpose of realising money due to them without the intervention of the Court, and that there is no provision in the Securitisation Act barring action under the Securitisation Act even where the Original Application has been filed before the Debts Recovery Tribunals under the Act of 1993 and is pending or has been decided. They contended that a harmonious reading of the provisions of Sections 2, 13, 35 and 37 of the Securitisation Act will show that the Banks and financial institutions can proceed simultaneously under the Securitisation Act and the Act of 1993.

11. But, certain other Counsel appearing as amicus curiae pointed out certain aspects, which, according to them, will show that if simultaneous action is permitted, it will divest the alleged debtors of certain rights as conferred by the Act of 1993, and also will impinge upon power and jurisdiction of the Debts Recovery Tribunals constituted under the Act of 1993 to decide the matters as are provided for in the Act of 1993. It was pointed out that under Section 2(o) of the Act of 1993 'Tribunal' means the Tribunal established under Subsection (1) of Section 3 of the Act of 1993, and that in view of the provisions of Sections 17 and 18 of the Act of 1993 it is only that Tribunal so constituted that will have the exclusive jurisdiction, powers and authority to entertain and decide applications from Banks and financial institutions for the recovery of debts due to such Banks and financial institutions Sections 17 and 18 read as follows: (1) A Tribunal shall exercise on and from the appointed day, the jurisdiction, powers and authority to entertain and decide applications from the Banks and financial institutions for recovery of debts due to such Banks and financial institutions.

(2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act.

18. Bar of jurisdiction-On and from the appointed day, no Court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under Arts. 226 and 227 of the Constitution) in relation to the matters specified in Section 17." It was also pointed out that Section 19 of the Act of 1993 enables the Banks and financial institutions to file the application before the Debts Recovery Tribunals constituted under the Act of 1993 for recovery of the amounts allegedly due to them. It is contended that no other authority has the jurisdiction to decide these matters for which provision has been made under the Act of 1993 in view of the specific provision contained in Sections 17 and 18 of the Act of 1993, and that such Debts Recovery Tribunals constituted under the Act of 1993 have jurisdiction to decide the applications where the amount of the debt due is not less than Rs. 10 lakhs (or such other sum as may be notified by the Central Government). The learned Counsel also pointed out that in view of the above said provisions even the Debts Recovery Tribunals constituted under the provisions of the Securitisation will also be excluded from entertaining and deciding the matters which the Debts Recovery Tribunal constituted under the Act of 1993 only are competent to decide.

12. The learned Counsel pointed out the provisions of Sub-section (20) of Section 19 of the Act of 1993, which enables the Debts Recovery Tribunal constituted under the Act of 1993 to pass interim or final orders including the order for the payment of interest for a period prior to the date of the O.A. and also for the period during which the O.A. was pending. It was also contended that this power conferred on the DRT under the Act of 1993 is far more wider than the power granted to the Civil Courts under the Civil Procedure Code. It was also pointed out that similar wide powers have been conferred on the Debts Recovery Tribunal constituted under the Act of 1993 under Sub-section (25) of Section 19 of the Act of 1993 enabling the DRT to pass orders or give directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice. The learned Counsel contended that these powers granted to the Debts Recovery Tribunals constituted under the Act of 1993 are sought to be taken away by the provisions of Section 13 of the Securitisation Act inasmuch as a notice under Section 13(2) of the Securitisation Act will include not only the principal amount but also the interest thereon, and that will impinge upon the powers of the Debts Recovery Tribunals constituted under the Act of 1993 to grant or refuse at least pendente lite interest.

13. It is also pointed out that Sub-sections (12), (13), (15), (18) and (20) of Section 19 of the Act of 1993 also enable the Debts Recovery Tribunals constituted under the Act of 1993 to pass interim orders including the appointment of a Receiver, and it is contended that if a Receiver is appointed by the Debts Recovery Tribunal constituted under the Act of 1993, then issuing notice and taking possession of the security under the Securitisation Act will be vexing the alleged debtor twice with regard to the same subject matter. It is also contended that if an Original Application filed before the Debts Recovery Tribunal constituted under the Act of 1993 is dismissed on a ground than the ground of jurisdiction, then also any action taken under the Securitisation Act will amount double jeopardy, and against principles of natural justice. It is also pointed out that Section 34 of the Act of 1993 specifically provides that the provisions of the Act shall have the effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, or in any instrument having effect by virtue of any law other than this Act, and that the provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of certain other Acts. Pointing out this provision, it is contended that any action taken by any Bank or financial institution under the Securitisation Act will be in derogation of the power of the Debts Recovery Tribunal constituted under the Act of 1993, when the O.A. between the same parties has been filed before the DRT under the Act of 1993. It is contended that once the lis commences, the contract between the parties comes to an end and the jurisdiction of the Tribunal constituted under the Act of 1993 commences and, therefore, the power granted to the Tribunal constituted under the Act of 1993 cannot be usurped by the action taken by the Banks and financial institutions under the Securitisation Act. It is also contended that if, for example, the Debts Recovery Tribunal constituted under the Act of 1993 and declined any of the reliefs which the Bank or financial institution can enforce under Section 13(4) of the Securitisation Act, then if the Bank or financial institution takes recourse to the provisions of Section 13(4) of the Securitisation Act for the same relief, it will be putting the alleged debtors to double jeopardy.

14. In this connection, the learned Counsel referred to the provisions of Sections 35 and 37 of the Securitisation Act, which read as follows: "35. The provisions of this Act to override other laws-The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." "37. Application of other laws not barred-The provisions of this Act or the Rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force." It is contended that the provisions of Sections 13, 35 and 37 of the Securitisation Act have to be read harmoniously, and if so read it will be clear that the action under Section 13 of the Securitisation Act cannot be taken when the O.A. is pending before the Tribunal under the Act of 1993. It is pointed out that it is clear from the provision contained in Section 37 of the Securitisation Act that the provisions of the Securitisation Act are in addition to and not in derogation of the provisions of the Act of 1993, and therefore no action can be taken simultaneously under the Securitisation Act when action has been taken under the provisions of the Act of 1993. Sub-section (10) of Section 13 has been pointed out to show that if the Bank or the financial institution takes action under the Securitisation Act for realising the money due to it, but realises only a portion of the money due to it, then, the Bank or financial institution cannot proceed under the provisions of the Act of 1993 to realise the balance, but will have to proceed under Sub-section (10) of Section 13 of the Securitisation Act.

15. Sub-section (10) of Section 13 of the Securitisation Act reads as follows : "Where dues of the secured creditor are not fully satisfied with the sale proceeds of the secured assets, the secured creditor may file an application in the form and manner as my be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent Court, as the case may be, for recovery of the balance amount from the borrower."Mardia Chemicals v. Union of India and Ors., II (2004) BC 397 (SC), has held that the right of appeal provided under Section 17 of the Securitisation Act is in effect an initial action, and that it will be a misnomer to call it an appeal. The learned Counsel contended that when a Bank or financial institution takes action under Section 13(4), the person aggrieved thereby has to approach the Debts Recovery Tribunal with what is called an appeal, but it is in reality an original proceeding commenced by such an aggrieved person. It is, therefore, contended that there may be cases when the Original Application is pending before the same Debts Recovery Tribunal with reference to the same subject matter under the Act of 1993 and also an appeal (or initial proceeding) taken under Section 17 of the Securitisation Act with reference to the same subject matter and between the same parties. It is also contended that though the appeal filed under Section 17 of the Securitisation Act, and the O.A. filed under the Act of 1993 with regard to the same subject matter and between the same parties could be pending before the same Debts Recovery Tribunal, but, still, they cannot be clubbed and decided. It is contended that in such a situation there is multiplicity of the proceedings, and conflict of decisions can arise, which should be avoided. It is also pointed out that there may be cases where a counter-claim is also pending against the Banks or financial institutions in the O.A. filed under the Act of 1993. It is also contended that the right of third parties to prefer objections against attachment and sale made under the provisions of the Act of 1993 will also be wiped out if simultaneous proceedings are allowed to be taken under the Securitisation Act. It is also pointed out by the learned Counsel that the Hon'ble Supreme Court has not considered and decided the question whether parallel proceedings can be taken under the Act of 1993 and also under the Securitisation Act, and that the Hon'ble Supreme Court in Mardia Chemicals' case had only considered the following questions: "(i) Whether it is open to challenge the statute on the ground that it was not necessary to enact it in the prevailing background particularly when another statute was already in operation? (ii) Whether provisions as contained under Sections 13 and 17 of the Act provide adequate and efficacious mechanism to consider and decide the objections/ disputes raised by a borrower against the recovery, particularly in view of bar to approach the Civil Court under Section 34 of the Act? (iii) Whether the remedy available under Section 17 of the Act is illusory for the reason it is available only after the action is taken under Section 13(4) of the Act and the appeal would be entertainable only on deposit of 75% of the claim raised in the notice of demand? (iv) Whether the terms or existing rights under the contract entered into by two private parties could be amended by the provisions of law providing certain powers in one sided manner in favour of one of the parties to the contract? (v) Whether the provision for sale of the properties without intervention of the Court under Section 13 of the Act is akin to the English mortgage and its effect on the scope of the bar of the jurisdiction of the Civil Court? (vi) Whether the provisions under Sections 13 and 17(2) of the Act are unconstitutional on the basis of the parameters laid down in different decisions of this Court? (vii) Whether the principle of lender's liability has been absolutely ignored while enacting the Act and its effect? The learned Counsel contended that the Hon'ble Supreme Court has not considered the question whether the Banks can initiate parallel proceedings under the Securitisation Act when already proceedings are pending under the Act of 1993 between the same parties.

16. Reference was made to the State Financial Corporations Act, 1951, especially to Sections 29 and 31 of the said Act. The learned Counsel appearing for the alleged debtors contended that it has been held that action can be taken either under Section 29 or under Section 31 of the State Financial Corporations Act and that action under both the sections cannot be taken simultaneously, though, if action under one section is taken, then if action is intended to be taken under the other section, the earlier action taken should be abandoned. The learned Counsel appearing for the alleged debtors contended that the 'doctrine of election' prohibits the Banks and financial institutions from taking action simultaneously both under the Act of 1993 and the Securitisation Act. The learned Counsel relied upon the decision in Andhra Pradesh State Financial Corporation v. Gar Re-Rolling Mills [(SC) 80 CC 140)] in support of this contention.

17. The learned Counsel for the alleged debtors also contended that on the principle of estoppel also the Banks and financial institutions are barred from taking action simultaneously under both the enactments.

18. But, the learned Counsel for the Banks and financial institutions contended that the various arguments put forward by some of the Counsel appearing as amicus curiae and Counsel appearing for the alleged debtors amount to challenging the vires of the Act, which has been upheld by the Hon'ble Supreme Court in Mardia Chemicals' case. The learned Counsel for the Banks and financial institutions contended that the various aspects pointed out by these Counsel cannot, therefore, persuade this Tribunal to hold that simultaneous action cannot be taken. They also contended that the doctrine of election has no application in this matter since the two enactments, namely, the Act of 1993 and the Securitisation Act operate in two different spheres. They contended that the Act of 1993 covers the wider area, whereas, the Securitisation Act is confined to the realization of the security for the purpose of realising the dues. It is pointed out that in an action under the Act of 1993 the debt is adjudicated, and provision has also been made for realization of such debt found due by the Tribunal, whereas, the Securitisation Act is confined to the realization of security interest. Therefore, it is contended that when the Act of 1993 operates in a wider area, while the Securitisation Act operates in a restricted area with regard to the security interest only, there is no scope for the application of the doctrine of election. It is also contended that the Securitisation Act is an independent Act wherein the remedy of appeal is provided against the action taken under Section 13(4) of the said Act, but not on a notice under Section 13(2) of the Act. It is also pointed out that the Debts Recovery Tribunal referred to in the Securitisation Act is not the same Debts Recovery Tribunal constituted under the Act of 1993 and, therefore, the Debts Recovery Tribunal constituted under the Act of 1993 has no right to grant stay. It is also contended that in view of the decision of the Hon'ble Supreme Court in Mardia Chemicals' case it is not open to the parties to challenge the action taken under the Securitisation Act.

19. The learned Counsel appearing for the Banks and financial institutions contended that the action taken under the Securitisation Act is more in the nature of an execution proceeding, whereas, the proceedings under the Act of 1993 are for adjudicating the amount due and for realising the amount due. It is contended that in the proceedings under the Act of 1993 in an O.A. the Debts Recovery Tribunal would be required to issue a recovery certificate, and it is only after the recovery certificate is issued in the O.A. the Recovery Officer would be able to commence the execution proceedings, whereas, the proceedings under Section 13 of the Securitisation Act are in nature of execution proceedings. Therefore, it is contended that the scope and ambit of the two remedies pursued, one in an Original Application filed before the DRT under the Act of 1993, and the other viz, proceedings taken under Section 13 of the Securitisation Act would be different, and that being so, the doctrine of election would have no application. The learned Counsel for the Banks and financial institutions contended that this Tribunal will not go into the question whether the borrower will be prejudiced since there is no provision for hearing when the Banks or financial institutions take action under Section 13(2) of the Securitisation Act. It is pointed out that mere pendency of the O.A. does not mean that the alleged debtors are adversely affected. It is contended that the provisions contained in these two enactments should be read harmoniously to expedite the recovery of dues and to prevent the dilatory tactics adopted by the debtors. In this connection it is pointed out that if a claim is negatived on facts in the proceeding under the Act of 1993, action cannot be taken in execution proceedings. It is also pointed out that in the proceedings under the Act of 1993 the Debts Recovery Tribunal deals not only with the property charged or secured but also any other property in view of the provisions contained in Sub-sections (12) to (15) and (18) of Section 19, whereas under the Securitisation Act the proceeding is against the secured asset covering the debt in question.

In this connection, the provisions of Section 2(g) of the Act of 1993 are pointed out and contended that the debt which can be recovered in proceedings under the Act of 1993 can be a secured or unsecured debt, whether payable under decree, order, mortgage or otherwise. It is contended that the enforcement of the security interest by taking action under Section 13 of the Securitisation Act without the intervention of the Court does not come into conflict with the O.A., pending before the Court and, therefore, both the proceedings, namely, the O.A. under the Act of 1993 and the action under the Securitisation Act can go on simultaneously. The learned Counsel for the Banks and financial institutions relied upon the decision of the Hon'ble Allahabad High Court in Salim Ahmad and Ors. v. State Bank of India and Ors., (WP 13559/2003 decided on 8.4.203) in support of the contention that simultaneous proceedings can go on. In this decision, the Hon'ble Allahabad High Court has held as follows: "Next question that arises is whether during pendency of the suit, the defendant-Bank can resort to Section 13(4). To answer the question reference may be made to Sections 35 and 37 of the Act. The former section provides that provision of the Act will override other laws and so far latter section is concerned, it envisages that provisions of this Act or the rules made thereunder shall be in addition to and not in derogation of the Recovery of Debts Due to Banks and Financial Institutions Act and other Acts as mentioned therein.

So when alternative method has been prescribed to recover the amount which the petitioners are liable to pay and the Bank in order to enforce payment has taken recourse to the Act which has the overriding effect over other laws, no fault can be found with the defendant Bank in proceeding under the Act." The learned Counsel for the Banks and financial institutions also relied upon the decision in Apex Electricals Ltd. v. ICICI Bank Ltd., Vol. 107 (2003) Co. Cases 117 (Gujarat) in support of the contention that simultaneous proceedings can go on. The Hon'ble High Court of Gujarat, after referring to certain provisions of the Securitisation Act held as follows: ".......Therefore, it can be said that the present Act is providing for an additional procedure for enforcement of security interest in secured assets by a certain class of secured creditors." "No defaulter who has become liable to make the payment as per terms of agreement of loan can assert as of right, that since the procedure or recovery of the defaulted money is provided additionally or changed by the Legislature or Parliament, it results in altering a vested right of the mortgagor who has acquired the status of a defaulter by not paying the mortgage money or loan amount as agreed. As such no default can invoke the principles of equity by contending that recovery through the intervention of Court was to result in delay in process of recovery and since the same will not be there on account of direct power/right given to creditor, injustice will be caused to him if provisions of the Act are interpreted as retrospective or retroactive. No person can be allowed to contend that since the procedure is changed of facing the consequences of default, may be through the intervention of the Court initially or afterwards such procedural laws should be read as prospective only and it would not apply to the defaults which have already become due when the Act came into force...." "Even otherwise also, as observed earlier, since the Act is a procedural remedial measure provided to a certain class of secured creditors for enforcement of security interest, it cannot be read as having effect only qua the actions and the transactions of loan after the Act came into force is a default or non-performing assets after the Act came into force. As such the Act intends to cover all transactions of loan already entered into subject to the provisions of within the period of limitation and the defaults in making repayment and the debts already classified as non-performing assets and such future contingencies too, therefore, the said contentions raised on behalf of the petitioners fail and hence are rejected.

It was also contended on behalf of the petitioners that the Bank or the financial institutions covered by the provisions of the Act cannot resort to two parallel remedies even if it is considered that in view of the provisions of the present Act the transactions of loan already entered into prior to the Act would also be covered in the present Act. Learned Counsel for the petitioners had pressed in service the doctrine of election for substantiating such contention.

It was also submitted on behalf of the petitioners that in view of Section 13(10) providing for filing of the application before the DRT for the balance amount of the dues of the secured creditors shows that Parliament intended for only one remedy at a time and after the one remedy is exhausted, the second remedy can be resorted to.

On behalf of the respondent-Bank, it was submitted, inter alia, that as such the principles of the doctrine of election would not be applicable in the present case since there are not inconsistent remedies and the remedy provided under the present Act is a remedy limited to the enforcement of the security interest qua secured property, whereas in the normal law for recovery of outstanding it would be a wider remedy, which can be enforced against the personal property of the judgment debtor in case such contingencies arise....." ".....Hence, when two modes of recovery of the realization of the dues are provided out of which one is limited to secured assets or security interest in secured assets and the another is against all assets including personal assets of the debtor, it cannot be said that such remedies are inconsistent to each other. The remedy provided under the present Act is restricted remedy to secured creditors that too a certain class of secured creditors, whereas the law for providing the normal remedy for all classes of creditors is a wider remedy. There is nothing as such inconsistent in both such remedies, save and except, when the question arises of resorting to both the remedies simultaneously qua the secured assets, which shall be dealt with hereinafter. As such the question of considering the doctrine of election would arise only when there are two inconsistent remedies provided." ".....Hence, the contention raised on behalf of the petitioners that as per the principles of doctrine of election or the rule that a person cannot be allowed to approbate or reprobate at the same time and, therefore, the secured creditors or the financial institutions covered by the Act cannot simultaneously resort to the remedies provided under this Act with the remedies provided under any other law for the time being in force for recovery of the outstanding dues, cannot be accepted......" ".....If the situation is created of allowing only one remedy at a time, it may create further irreversible situation which cannot be said to be intended by Parliament. As observed earlier, the Act is retroactive in nature and it covers all transactions entered into prior to the Act came into force and, therefore, it is deemed and it can reasonably be construed that Parliament was aware that the proceedings are filed or pending before the Tribunal or before the other competent Forum for recovery of the dues and it is with that purpose the provisions of Section 37 are made in the Act. But if one remedy at a time as permitted or the condition is read that for resorting to the present remedy under the Act, the other proceedings before the Tribunal or before any competent Forum for recovery of the outstanding dues should be withdrawn, then in that case, for all-time to come, it may result in abandonment of the claim by the creditor which can never be said to have been intended by Parliament while enacting the present Act and, therefore, also the contention raised on behalf of the petitioners deserves to be rejected and hence rejected." "However, in a given case it may happen that the Bank or the financial institutions may resort to simultaneous remedies as provided under the Act, but in such circumstances no party to the proceedings, either under the Act or before the competent Forum, under any other law for time being in force for recovery of the outstanding dues, can be allowed to create a situation of nullifying the effect of a binding judgment on the facts by resorting to the provisions of the present Act, nor can any party be allowed to create a situation which may result in conflicting decisions of the competent Forum provided under any other law for the time being in force and the Forum provided under the present Act. As such, under those circumstances it would be for the authority or the Tribunal or the judicial Forum or any other Forum before whom the matter is pending to stay proceedings qua secured assets, if the creditor has resorted to the remedies under the present Act, if circumstances so demand." ".....but suffice to say that while maintaining the two simultaneous remedies, no parties to the proceedings should be allowed to take any undue benefit which results in frustrating the basic principles of justice and good conscience." "..... So long as the Forum under any other law for the time being in force is adjudicating upon the dispute is the same and is rendering the decision on the points or touching the rights of the creditor or borrower qua other than that of secured assets as such there is no question of any conflict, because such rights of the parties governed by the order or judgment or award to that extent is operating in absolute, since the remedy provided under the present Act is only qua secured assets. Such conflicts of decision by DRT vis-a-vis the decision of the Forum under any other law for the time being in force may operate qua the right of the secured creditors in respect to secured assets.

Therefore, when Bank or secured creditors has to resort to the proceedings under Section 13 of the present Act, it will have to take into consideration the proceedings before any competent Forum under any other law for the time being in force to the extent it touches the rights of the creditor qua secured assets....." "....In a situation, where proceedings are pending before the competent Forum under any other law for the time being in force and the Bank also resorts to remedy provided under Section 13 of the present Act, then the fair play action and the basic principles of rule of law and justice do require that qua the very secured assets, the proceedings before other Forum under any other law for the time being in force are stayed to the extent and only relating to secured assets and it may continue on other aspects and qua the right of the parties other than that of secured assets." If we take into consideration the decisions of the Hon'ble High Court of Allahabad and the Hon'ble High Court of Gujarat, then it will be clear that the contentions put forward on behalf of the alleged debtors and some of the Counsel who advanced arguments to this effect as amicus curiae could not have been accepted, and would have to be rejected since these decisions are binding on me.

20. But, a subsequent development has taken place. The Government of India have issued the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Ordinance, 2004 (No. 5 of 2004) amending certain provisions of the Securitisation Act as also the Act of 1993. In Section 13 of the Securitisation Act the following amendments have been introduced: (i) after Sub-section (3), the following sub-section shall be inserted, namely- "(3-A) If, on receipt of the notice under Sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower: Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge under Section 17A...." By this ordinance the following amendments have been introduced to Section 19 of the Act of 1993: "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) Ordinance, 2004 for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, if no such action had been taken earlier under the 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." By this amendment a proviso has been added to Sub-section (1) of Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. It provides that the Bank or the financial institution may, with the permission of the Debts Recovery Tribunal on an application filed by it, withdraw the Application (O.A.). It is also provided that the said O.A. could have been made either before or after this ordinance of 2004. It is also provided that such withdrawal must be for the purpose of taking action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. According to the second proviso introduced by this amendment, when such an application for withdrawal of the O.A. is filed, it shall be disposed of within 30 days by the Tribunal. The third proviso introduced enables the Debts Recovery Tribunal to refuse permission for withdrawal applied for by giving reasons therefor. Some of the learned Counsels who addressed arguments as amicus curiae and the learned Counsel for the alleged debtors contended that the intention behind these provisos is that simultaneous proceedings both under the Act of 1993 and under the Securitisation Act cannot be taken, and that the Banks and financial institutions should apply their mind and decide under which one of the enactments they will proceed. They also contended that if these three provisos arc read together, it will be clear that the doctrine of election has to be followed, and that means the Bank or financial institution can proceed under only one enactment at one time. But, some of the learned Counsels appearing as amicus curiae and the Counsel appearing for the Banks and financial institutions contended that the first proviso provides that the Bank or financial institution "may" file an application for withdrawal of the O.A. and that has not been made mandatory or a condition precedent for pursuing the action under the Securitisation Act. They also contended that while amendments have been made to Section 19 of the Act of 1993, no amendment has been made to Section 13 of the Securitisation Act specifically providing that the Bank or financial institution can pursue only one of the remedies, or that they should withdraw the O.A.for the purpose of pursuing the remedy under the Securitisation Act.

They also contended that no specific prohibition has been engrafted in the Securitisation Act preventing the Banks and financial institutions from pursuing both the remedies under the Act of 1993 and the Securitisation Act simultaneously.

21. But, I agree with the learned Counsel appearing for the alleged debtors and also some of the learned Counsel who addressed arguments as amicus curiae, and I am also of the view that the intention behind the amendment to Section 19(1) of the Act of 1993 by providing these three provisos is that Banks and financial institutions shall pursue one of the remedies only, either under the Act of 1993 or under the Securitisation Act, at a time. Because, even under the general law the Banks and financial institutions have the right to withdraw any O.A.pending before any Debts Recovery Tribunal. But, the purpose of this specific proviso is to allow the Banks and financial institutions to withdraw the O.A. with liberty to, and for the purpose of pursuing the remedy under the Securitisation Act. Therefore, though the word "may" has been used, I am of the view that it should be read in the context as "shall", and that it is mandatory for the Banks and financial institutions to apply to the DRT for withdrawing the pending O.A. for the purpose of taking action under the Securitisation Act.

22. Some of the learned Counsel who addressed arguments as amicus curiae and the learned Counsel for the Banks and financial institutions pointed out that the qualification found in the proviso, namely, "if no such action had been taken earlier under that act", and contended that if action had been taken earlier, there is no need to seek the permission of the Debts Recovery Tribunal to withdraw the O.A.Therefore, we will have to examine as to what is the meaning of the words "if no such action had been taken earlier under that act" in the context in which it been used. The learned Counsel for the Banks and financial institutions contended that it means that if no action had been taken under Section 13(2) of the Securitisation Act then only the Banks and financial institutions have to apply for permission to withdrawn the O.A. for the purpose of taking action under the Securitisation Act, and not otherwise. But, the learned Counsel for the alleged debtors and some of the learned Counsels who addressed arguments as amicus curiae contended that these words should be construed to mean that if no action had been taken under the Act of 1993 earlier for withdrawing the O.A.

23. But, 1 am of the view that both the contentions cannot be accepted. I find that mere issuing of" notice under Section 13(2) of the Securitisation Act cannot be stated to be an action under the Securitisation Act. It is only a notice calling upon the debtor to pay and discharge his liability in full within 60 days from the date of notice, and informing the alleged debtor that otherwise the secured creditor shall be entitled to exercise all or any of the rights under Sub-section (4) of Section 13. Further, the proviso to the newly introduced Sub-section (3-A) which has been reproduced earlier provides that the reasons communicated by the secured creditor or the likely action of the secured creditor at the stage of communication of reasons shall not confer on the borrower any right to prefer an application under Section 17 or 17-A. This indicates that the 'action' under the Securitisation Act is to take place after the notice under Section 13(2) of Securitisation Act. Therefore, the notice under Section 13(2) of the Securitisation Act cannot be stated to be an action under the Securitisation Act. Further, under Sub-section (4) of Section 13 of the Securitisation Act, if the borrower fails to discharge his liability within the specified period, only then the secured creditor may take recourse to one or more of the measures mentioned in that subsection to recover its secured debt, i.e., (a) take possession of the secured assets of the borrower; (b) take over the management of the secured assets of the borrower; (c) appointing a person as the manager to manage the secured assets; (d) requiring any person who has acquired any of the secured assets from the borrower to pay the secured creditor the money due.

24. Therefore, when the first proviso to Section 19(1) (introduced by the Ordinance of 200',) mentions that 'if no such action had been taken earlier under that Act', it means that the Bank or the financial institution should not have taken action under Section 13(4) of the Securitisation Act. It would be also worth-noting that the Hon'ble Supreme Court in Mardia Chemical's case (cited supra) has held that where the secured creditors had taken action under Section 13(4) of the Securitisation Act, it would be open to the borrower to file appeal under Section 17. The borrowers have been held to have no such right if the mere notice under Section 13(2) of the Securitisation has been given. In paragraph 80 of the judgment of the Hon'ble Supreme Court it has been observed that under the Securitisation Act, before taking action, a notice of 60 days is required to be given and after the measures under Section 13(4) of the Act have been taken, a mechanism has been provided under Section 17 of the Act to approach the Debts Recovery Tribunal.

25. Therefore, by taking into consideration all these aspects, I am of the view that the meaning of the words "if no such action had been taken earlier under that act" is that if the Bank or financial institution had not taken any action under Section 13(4) of the Securitisation Act, earlier.

26. Therefore, my answer to the questions of law framed for consideration in these appeals arc as follows: (1) If the Bank or financial institution had not earlier taken action under Section 13(4) of the Securitisation Act by taking recourse to the measures mentioned in Section 13(4) of the Securitisation Act, then the Bank or the financial institution will have to seek the permission of the Debts Recovery Tribunal for withdrawing the O.A., if the Bank or the financial institution wants to take action under the Securitisation Act. It is only after the Debt Recovery Tribunal permits withdrawal of the pending O.A that the Bank or financial institution can take action under Section 13(4) of the Securitisation Act.

(2) In view of the Ordinance of 2004 the Banks and financial institutions have to follow at a time one of the remedies provided for realising security assets, i.e. under the Act of 1993 or under Section 13(4) of the Securitisation Act, with regard to the security interest. I am also of the view that in case an Original Application (O.A.) is pending before the Debts Recovery Tribunal for the recovery of the debts due to Banks and financial institutions not only by other modes but also by realization of the secured assets, then if the Bank or financial institution wants to take action under Section 13(4) of the Securitisation Act, then the Bank or financial institution will have to move an application for withdrawing the O.A., and then only it can take action under Section 13(4) of the Securitisation Act.

(3) So far as the cases where O.As. have already been decided, the parties aggrieved by the Bank's or financial institution's action in either taking possession of the secured assets or by getting a Receiver or manager appointed, etc. with regard to the secured assets under the Act of 1993, then the aggrieved party will have to approach the appropriate Forum under the Act of 1993 for appropriate relief. But, if the Bank or financial institution takes action under Section 13(4) of the Securitisation Act by resorting to any of the measures mentioned in Section 13(4) of the Securitisation Act, then the aggrieved party will have to seek remedy under Section 17 of the Securitisation Act before the Debts Recovery Tribunal.

As indicated earlier, the individual appeals will have to be heard and decided in the light of this decision and/or by taking into consideration the facts arising for consideration in each appeal.

27. Copy of this order be furnished to all the parties to the appeals, the Counsel who assisted this Tribunal as amicus curiae and also be forwarded to the concerned Debts Recovery Tribunals. Copy of this order be also attached to each of the appeals mentioned in the cause title.