The full bench of Allahabad High Court, in M/s N.C.M.L. Industries Ltd. through Director and another Vs. Debts Recovery Tribunal, Lucknow and others, has held that taking “symbolic possession” or issuance of possession notice, meeting with any resistance, cannot be treated as “measure”/s taken under Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, and, therefore, the borrower at that stage cannot file an application under Section 17(1) before DRT.
Answering the reference before it, the bench headed by Chief Justice Dilip B Bhosale observed that a securitisation application under Section 17(1) of the Act is maintainable only when actual/physical possession is taken by the secured creditor or the borrower loses actual/physical possession of the secured assets.
The original writ petition was filed challenging the order of DRAT, wherein it had allowed bank’s appeal and held that Application under Section 17 of the Act is not maintainable as only “symbolic possession” was taken by the Bank. DRT order restraining the bank from taking physical possession of the secured assets during the pendency of the securitisation application was set aside by DRAT.
The single judge observed that in Aum Jewels and others v Vijaya Bank, a division bench has held that against an action/measure taken by the secured creditor by issuing a notice/passing an order of “symbolic possession” under Section 13(4) of the Act, a remedy under Section 17 is available and as such the securitisation application/petition filed under Section 17 would be maintainable against such a measure under Section 13(4)(a) of the Act. The DRAT had relied on Sushila Steels Vs. Union Bank of India, another decision by another division bench, which held otherwise.
The full bench observed: “The submission “every action taken under Section 13(4)” would, in our opinion, not mean steps taken for taking action/measure under Section 13(4)(a). Merely taking step to take possession is not amenable to challenge under Section 17. The action of taking possession is not an automatic process, in the sense that the moment notice is issued, means “physical possession” is taken or the borrower stands dispossessed physically or loses possession. The expression “symbolic possession” means “constructive possession” or in other words “paper possession” and not “physical” or “actual possession”.”
The bench further observed that till actual (physical) possession is taken, it cannot be stated that the measures taken under Section 13(4) are complete and unless the “measures” are taken, that is to say “physical/actual” possession is taken or the borrower loses possession, he shall not have any right to approach DRT under Section 17(1) of the Act on any ground whatsoever.