IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. _______OF 2009 (Arising out of S.L.P.(C)No.27399 of 2008)

Authorized Officer,  Indian Overseas Bank & Anr.     ...   Appellants  

Vs. M/s. Ashok Saw Mill     ...   Respondent

With CIVIL APPEAL NO.       of 2009

(Arising out of S.L.P.(C)No.3020 of 2009)

J U D G M E N T

ALTAMAS KABIR, J.

1. Leave  granted  in  both  the  Special  leave  

petitions.

2. The  respondent  firm  and  its  sister  concern,  

M/s. Ashok Woodworks, which is also a partnership  

firm, availed of various loans from the appellant

Bank which were secured by movable and immovable  

assets.   The  loanee  firms  having  defaulted  in  

repayment  of  the  loans  and  since  their  accounts  

became Non Performing Assets (hereinafter referred  

to  as  ‘NPA’),  the  Bank  initiated  action  against  

them under the provisions of the Securitisation and  

Reconstruction of Financial Assets and Enforcement  

of  Security  Interest  Act,  2002  (hereinafter  

referred  to  as  ‘the  SARFAESI  Act’)  and  issued  

separate  demand  notices  to  the  respondent  

partnership  firm  and  its  sister  concern  under  

Section 13(2) thereof on 17th September, 2002, and  

21st September,  2002,  for  the  recovery  of  

Rs.1,56,47,638/and Rs.1,40,18,468.36, respectively.

3. As the respondent and its sister concern did  

not  respond  to  the  said  demand  notices,  the  

appellant Bank invoked Section 13(4) of the above  

Act and took possession of the secured assets on 4th  

December, 2002.  The said action of the Bank, as  

also the vires of the SARFAESI Act, were challenged  

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by the respondent partnership firm and its sister  

concern  by  way  of  two  separate  writ  petitions,  

being Writ Petition Nos.46328 and 46329 of 2002, in  

which an interim stay of all further proceedings  

under the said Act was granted on 27th December,  

2002.   The  said  writ  petitions  were  ultimately  

heard and dismissed by a common order on 23rd April,  

2004,  with  liberty  to  the  respondent  firm  to  

approach the Debts Recovery Tribunal (hereinafter  

referred to as ‘the DRT’), within 30 days.  Since,  

despite such liberty, the respondent firm did not  

approach the DRT, the Bank took a decision to sell  

the secured assets of the respondent firm.  At that  

stage, negotiations were held between the parties  

for  a  One-Time  Settlement,  which  also  failed,  

causing the Bank to issue a sale notice dated 26th  

July, 2007, inviting sealed tenders for the sale of  

the  secured  assets  of  the  firm.  The  same  was  

challenged by the respondent firm on 18th August,  

2007,  in  Writ  Petition  No.27472  of  2007  on  the  

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ground that it was unable to move the DRT in view  

of  the  expiry  of  the  period  of  limitation  

prescribed  under  the  Act.  After  hearing  the  

parties,  the  High  Court  refused  to  grant  any  

interim  relief  and  posted  the  writ  petition  for  

final disposal.   

4. During the pendency of the said writ petition,  

the  respondent  firm,  along  with  M/s.  Ashok  

Woodworks, filed SARFAESI Application No.74 of 2007  

before the Debts Recovery Tribunal at Madurai for  

setting aside the sale notice dated 26th July, 2007,  

on the selfsame cause of action.  Despite being  

informed of the pendency of the writ petition for  

the  selfsame  reliefs,  the  said  Tribunal  by  its  

order dated 7th September, 2007, directed the Bank  

to defer the proposed sale which was scheduled to  

be held on 7th September, 2007.  The appellant Bank  

thereupon filed Civil Writ Petition No.1392 of 2007  

before the Madurai Bench of the Madras High Court  

challenging the filing of S.A. No.74 of 2007.  The  

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same was admitted and all proceedings in S.A. No.74  

of 2007 were stayed.  The said writ petition came  

up  for  hearing  before  the  High  Court  on  18th  

September, 2007, and was disposed of in the absence  

of the counsel for the Bank with liberty to the  

respondent firm to move the Debts Recovery Tribunal  

at  Madurai.   The  appellant  Bank  filed  Review  

Petition No.165 of 2007, praying for recall of the  

order dated 18th September, 2007, by which the writ  

petition had been disposed of in its absence.  On  

6th October, 2007, the appellant Bank was permitted  

to open the sealed tenders which it had received  

pursuant to the sale notice dated 26th July, 2007,  

subject  to  the  condition  that  the  sale  effected  

would be subject to the confirmation of the Court.  

Pursuant to the said order, the sealed tenders were  

opened  on  8th October,  2007,  and  3  of  the  5  

properties were sold and the same was recorded by  

the DRT.  Subsequently, despite the pendency of the  

review petition, the respondent firm withdrew S.A.  

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No.74 of 2007, and filed a fresh application being  

S.A. No. 104 of 2007.  The review petition filed by  

the Bank before the Madurai Bench of the Madras  

High  Court  was  consequently  rendered  infructuous  

and was dismissed on 23rd June, 2008.

5. Aggrieved by the said order, the Bank filed  

Writ Appeal No.926 of 2008, which was dismissed by  

the  Division  Bench  of  the  High  Court  on  1st  

September, 2008, against which the present appeal  

has been preferred.   

6. Appearing  for  the  appellant  Bank,  Mr.  V.T.  

Gopalan, learned Senior Advocate, urged that before  

the learned Single Judge it had been contended that  

the provisions of the SARFAESI Act being similar to  

an  English  mortgage,  on  the  issuance  of  notice  

under Section 13(4) thereof and upon taking over  

possession  of  the  secured  assets,  the  property  

vested  with  the  Bank  which  was  thereafter  at  

liberty to bring it to sale as it deemed fit and  

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proper.  It had also been submitted that despite  

liberty having been granted to the respondent firm  

to move the DRT within the time permitted under the  

said order, the respondent firm had chosen not to  

do  so  and  was,  therefore,  precluded  from  

challenging the same subsequently.  In this regard,  

reliance had been placed on the decision of this  

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

India  &  Ors. [(2004)  4  SCC  311],  in  which  the  

validity of the SARFAESI Act had been challenged.  

While upholding the constitutional validity of the  

Act, it was also held that the steps taken pursuant  

to notice under Section 13(4) of the Act could not  

be challenged before the DRT under Section 17 of  

the  SARFAESI  Act  beyond  the  period  prescribed  

thereunder.   Reference  was  also  made  to  the  

decision of this Court in  Transcore Vs.  Union of  

India & Anr. [(2008) 1 SCC 125], where the same  

view was reiterated.

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7. Mr.  Gopalan  submitted  that  a  Division  Bench  

decision of the Bombay High Court rendered in UCO  

Bank,  Churchgate  Branch Vs.  M/s.  Kanji  Manji  

Kothari & Company and its partners [Writ Petition  

No.3566 of 2007] on 19th December, 2007, was also  

cited before the learned Single Judge in support of  

the contention that once possession is taken under  

Section  13(4)  of  the  Act,  the  right,  title  and  

interest  of  the  borrower  gets  extinguished  and  

thereafter it would not be open for the borrower to  

challenge  the  subsequent  sale  in  an  application  

under Section 17 of the SARFAESI Act.  It was also  

urged  that  the  Tribunal  could  not  entertain  a  

debate on the question whether the debt had become  

due or not because the SARFAESI Act proceeds on the  

basis that the liability is crystallized and the  

debt becomes due the moment action under Section  

13(4)  is  taken  and  a  security  interest  is  also  

created  in  the  secured  assets.   It  was  also  

observed that while the DRT is entitled to consider  

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whether the possession of the secured assets had  

been taken in accordance with the SARFAESI Act and  

the  rules  framed  thereunder,  once  the  liability  

stood  crystallized  it  could  no  longer  be  

adjudicated upon by the DRT.   

8. Mr. Gopalan submitted that the scope of the  

inquiry before the DRT is confined to the action  

taken by the secured creditor under Section 13(4)  

of the SARFAESI Act and the subsequent action taken  

to bring the secured assets to sale or to transfer  

the  interest  therein  in  any  manner  whatsoever,  

could not be made the subject matter of inquiry  

before the DRT.   In other words, the jurisdiction  

of the Tribunal under Section 17(3) would have to  

be  confined  to  any  action  taken  by  the  secured  

creditor in taking possession of the secured assets  

under  Sub-section  (4)  of  Section  13  and  not  in  

regard to any subsequent steps which the secured  

creditor may take to dispose of the secured assets  

in accordance with the provisions of the Act.  Mr.  

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Gopalan  submitted  that  the  SARFAESI  Act  neither  

contemplates  restoration  of  possession  of  the  

secured assets by efflux of time nor does it place  

a mandate on the secured creditor to dispose of the  

secured assets within a specified period.  It was  

urged that since the secured assets vest with the  

secured  creditor  once  possession  is  taken,  the  

rules  do  not  contemplate  the  involvement  of  the  

borrower in the sales process and the Authorized  

Officer  is  also  empowered  under  Rule  8  of  the  

Security  Interest  (Enforcement)  Rules,  2002,  to  

sell the secured assets by way of private treaty.

9. Mr.  Gopalan  lastly  contended  that  the  Writ  

Appeal No.926 of 2008 had been filed against the  

order of the learned Single Judge dated 23rd June,  

2008,  made  in  Review  Application  No.165  of  2007  

filed by the Bank for review of the order dated 18th  

September, 2007, passed in the writ petition filed  

by  the  Bank  and  that  such  appeal  was  not  

maintainable  having  regard  to  the  provisions  of  

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Order 47 Rule 7 of the Code of Civil Procedure.  

Consequently, the order passed therein was invalid  

on such score as well and was liable to be set  

aside.  

10. While adopting Mr. Gopalan’s submissions, Mr.  

Altaf Ahmed, learned Senior counsel appearing for  

the Auction Purchaser in the appeal arising out of  

S.L.P.(C)No.3020 of 2009, submitted that the action  

taken  by  the  Bank  under  Section  13(4)  of  the  

SARFAESI Act was not governed by the provisions of  

the Limitation Act.  He urged that Section 13(2) of  

the  Act,  which  deals  with  the  enforcement  of  

security interest, does not prescribe any period of  

limitation and only sets out the procedure for the  

recovery of dues once a debt is classified as a  

Non-Performing Asset (NPA).  Mr. Ahmed submitted  

that Section 13(2) provides for a demand to be made  

within 60 days from the date of notice being issued  

to  the  borrower  to  discharge  his  liabilities  in  

full.  But once the demand was made, no further  

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period of limitation is prescribed or contemplated  

for taking action in terms of Section 13(4) of the  

Act.  Mr. Ahmed urged that Section 36 of the Act,  

which deals with limitation, will have to be read  

in the aforesaid manner since it refers only to  

steps to be taken under Section 13(4) which would  

relate back to the stage of Section 13(2) of the  

Act.

11. Mr. Ahmed submitted that Section 34 gives the  

provisions  of  the  SARFAESI  Act  an  over-riding  

effect  over  the  general  law,  which  will  also  

include the law of limitation.

12. Opposing the submissions made on behalf of the  

Bank and the Auction Purchaser, Mr. S. Sethuraman,  

learned  Advocate  appearing  for  the  respondent,  

submitted  that  after  the  pronouncement  of  the  

decision in  Mardia Chemicals Ltd.’s case (supra),  

certain amendments were effected to Section 17 of  

the SARFAESI Act, whereby the provisions of Sub-

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Sections (2) and (3) of Section 17 of the SARFAESI  

Act were substituted with Sub-Sections (2) to (7)  

by Act 30 of 2004, in which a new dimension was  

added providing for an inquiry before the Tribunal  

in an application filed under Section 17.  The same  

gave rise to a continuing cause of action which was  

available  to  a  borrower  to  work  out  his  remedy  

under Section 17 of the SARFAESI Act by challenging  

the sale notice.   

13. In support of his submissions, Mr. Sethuraman  

referred  to  and  relied  on  two  decisions  of  the  

Madras High Court in (1)  Indian Overseas Bank &  

Ors. Vs. G.S. Rajshekarn, [(2008) 4 MLJ 1012] and  

(2) Ramco Super Leathers Ltd. & Anr. Vs. UCO Bank &  

Anr., [(2007) 5 MLJ 986], which were affirmed by  

the Full Bench of the Madras High Court in  M/s.  

Lakshmi Shankar Mills (P) Ltd. Vs.  The Authorized  

Officer/Chief Manager, Indian Bank & Ors., [(2008)  

2  LW  381].  Mr.  Sethumaran  submitted  that  after  

considering the provisions of Section 17 in detail,  

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the learned Single Judge relying upon the Division  

Bench  judgment  came  to  the  conclusion  that  any  

person, including a borrower, could file an appeal  

under Section 17 at any stage, including the stage  

when the management of the business is taken over  

or possession is taken of the secured assets of the  

borrower.  In such a case, the Tribunal has power  

to restore possession in favour of the borrower, if  

such action taken under Sub-Section (4) of Section  

13 is declared invalid.   

14. The main question which falls for determination  

in  this  appeal  is  whether  the  DRT  would  have  

jurisdiction to consider and adjudicate with regard  

to post 13(4) events or whether its scope in terms  

of Section 17 of the SARFAESI Act would be confined  

to the stage contemplated under Section 13(4), as  

contended  on  behalf  of  the  appellants.   An  

additional  question  with  regard  to  the  

maintainability of the appeal will have to be taken  

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into  consideration  while  deciding  the  present  

appeal.

15. In  order  to  answer  the  aforesaid  questions  

which arise in this appeal, it will be necessary to  

look into the relevant provisions of Sections 13  

and  17  of  the  SARFAESI  Act,  as  they  originally  

stood and as they now stand after the amendments  

effected thereto by the amending Act of 2004.

16. In the Statement of Objects and Reasons of the  

amending  Act  reference  has  been  made  to  the  

decision of this Court in  Mardia Chemicals Ltd.’s  

case (supra).  It has been mentioned therein that  

Sub-Section  (2)  of  Section  17  had  been  declared  

ultra vires Article 14 of the Constitution.  It was  

also mentioned that it had become necessary to make  

amendments in Sections 13 and 17 of the Act since  

it had been held that where a secured creditor had  

taken action under Sub-Section (4) of Section 13 of  

the Act, it would be open to the borrowers to file  

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appeals  under  Section  17  of  the  Act  within  the  

period of limitation as prescribed therefor.  It is  

on such account that Section 13 of the principal  

Act was amended by inserting Sub-Section (3-A).   

17. Further more, in Sub-Section (4) Clause (b) was  

substituted by a fresh provision which entitled the  

secured creditor to take over the management of the  

business of the borrower, including the right to  

transfer by way of lease, assignment or sale for  

releasing the secured asset.

18. The said amendments were made in order to give  

an opportunity to the borrower to approach the DRT  

at  any  stage  against  any  measure  taken  by  the  

secured creditor under Sub-Section (4) of Section  

13 which were not in conformity therewith and to  

have the possession of secured assets restored in  

the event such action was found to be invalid.  At  

the same time, more power was given to the secured  

creditor to exercise control over the management of  

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the  business  of  the  borrower  which  included  the  

right to transfer by way of lease, assignment or  

sale of the secured assets for releasing the same.

19. The scheme of the SARFAESI Act as it now stands  

after  the  2004  Amendment  for  enforcement  of  

security  interest  is  that  notwithstanding  the  

provisions of Section 69 or Section 69-A of the  

Transfer  of  Property  Act,  any  security  interest  

created in favour of any secured creditor may be  

enforced, without the intervention of the Court or  

Tribunal, in accordance with the provisions of the  

Act.  Chapter  III  of  the  Act  which  deals  with  

enforcement  of  security  interest  begins  with  

Section 13, which is one of the Sections relevant  

for  a  decision  in  this  appeal.   Since  we  are  

concerned with Sub-Sections (1) to (4) of Section  

13, the same are extracted hereinbelow :

“13. Enforcement of security interest.- (1) Notwithstanding anything contained in  section 69 or section 69A of the Transfer  of  Property  Act,  1882  (4  of  1882),  any  

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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  rights  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.

(3A) 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.

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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.  

(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;

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 or the debt;

(c)  appoint  any  person  (hereafter  referred to as the manager), to manage the  

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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.”

20. The other relevant provision which is Section  

17 is also included in Chapter III and has been  

extensively  amended  after  the  decision  in  the  

Mardia Chemicals Ltd.’s case (supra).  The same is  

also  reproduced  hereinbelow  for  a  better  

understanding of the scheme of the Act after the  

amendments effected :

“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  measure had been taken.

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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  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.  

(3) If, the Debts Recovery Tribunal, after  examining the facts and circumstances of  the  case  and  evidence  produced  by  the  parties, comes to the conclusion that any  of the measures referred to in sub-section  (4) of section 13, taken by the secured  creditor  are  not  in  accordance  with  the  provisions of this Act and the rules made  thereunder, and require restoration of the  management of the business to the borrower  or  restoration  of  possession  of  the  secured assets to the borrower, it may by  order, declare the recourse to any one or  more measures referred to in sub-section  (4)  of  section  13  taken  by  the  secured  

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creditors  as  invalid  and  restore  the  possession  of  the  secured  assets  to  the  borrower or restore the management of the  business to the borrower, as the case may  be, and pass such order as it may consider  appropriate and necessary in relation to  any of the recourse taken by the secured  creditor under sub-section (4) of section  13.  

(4)  If,  the  Debts  Recovery  Tribunal  declares the recourse taken by a secured  creditor under sub-section (4) of section  13, is in accordance with the provisions  of this Act and the rules made thereunder,  then,  notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in  force,  the  secured  creditor  shall  be  entitled to take recourse to one or more  of  the  measures  specified  under  sub- section (4) of section 13 to recover his  secured debt.  

(5) Any application made under sub-section  (1)  shall  be  dealt  with  by  the  Debts  Recovery  Tribunal  as  expeditiously  as  possible and disposed of within sixty days  from the date of such application:  

Provided  that  the  Debts  Recovery  Tribunal  may,  from  time  to  time,  extend  the said period for reasons to be recorded  in  writing,  so,  however,  that  the  total  period of pendency of the application with  the  Debts  Recovery  Tribunal,  shall  not  exceed four months from the date of making  of such application made under sub-section  (1).  

(6) If the application is not disposed of  by the Debts Recovery Tribunal within the  

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period of four months as specified in sub- section (5), any part to the application  may make an application, in such form as  may  be  prescribed,  to  the  Appellate  Tribunal for directing the Debts Recovery  Tribunal for expeditious disposal of the  application  pending  before  the  Debts  Recovery  Tribunal  and  the  Appellate  Tribunal may, on such application, make an  order  for  expeditious  disposal  of  the  pending application by the Debts Recovery  Tribunal.  

(7)  Save  as  otherwise  provided  in  this  Act, the Debts Recovery Tribunal shall, as  far as may be, dispose of the application  in accordance with the provisions of the  Recovery  of  Debts  Due  to  Banks  and  Financial  Institutions  Act,  1993  (51  of  1993) and the rules made thereunder.]"  

21. It is clear that while enacting the SARFAESI  

Act the Legislature was concerned with measures to  

regulate  securitisation  and  reconstruction  of  

financial  assets  and  enforcement  of  security  

interest.  The Act enables the Banks and Financial  

Institutions  to  realise  long-term  assets,  manage  

problems of liquidity, asset liability mismatches  

and improve recovery by exercising powers to take  

possession of securities, sell them and reduce non-

performing assets by adopting measures for recovery  

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or reconstruction.  The provisions of Section 13  

enable  the  secured  creditors,  such  as  Banks  and  

Financial Institutions, not only to take possession  

of the secured assets of the borrower, but also to  

take over the management of the business of the  

borrower, including the right to transfer by way of  

lease,  assignment  or  sale  for  realizing  secured  

assets, subject to the conditions indicated in the  

two provisos to Clause (b) of Sub-Section (4) of  

Section 13.

22. 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  

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measures having taken for the reliefs indicated in  

Sub-Section (3) thereof.

23. 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.  The  

consequences of the authority vested in DRT under  

Sub-Section (3) of Section 17 necessarily implies  

that the DRT is entitled to question the action  

taken by the secured creditor and the transactions  

entered into by virtue of Section 13(4) of the Act.  

The  Legislature  by  including  Sub-Section  (3)  in  

Section 17 has gone to the extent of vesting the  

DRT with authority to even set aside a transaction  

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including  sale  and  to  restore  possession  to  the  

borrower in appropriate cases.  Resultantly, the  

submissions advanced by Mr. Gopalan and Mr. Altaf  

Ahmed that the DRT has no jurisdiction to deal with  

a post 13(4) situation, cannot be accepted.  The  

dichotomy in the views expressed by the Bombay High  

Court and the Madras high Court has, in fact, been  

resolved  to  some  extent  in  the  Mardia  Chemicals  

Ltd.’s case (supra) itself and also by virtue of  

the amendments effected to Sections 13 and 17 of  

the  principal  Act.   The  liberty  given  by  the  

learned Single Judge to the appellants to resist  

S.A.No.104  of  2007  preferred  by  the  respondents  

before the DRT on all aspects was duly upheld by  

the Division Bench of the High Court and there is  

no  reason  for  this  Court  to  interfere  with  the  

same.

24. 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  

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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.   

25. The other point regarding the maintainability  

of the appeal against the review petition, is of  

little consequence since the appeal was preferred  

by the appellants themselves.  Having invoked the  

jurisdiction  of  the  Appellate  Court,  it  was  no  

longer open to the appellants to take a contrary  

view  and  to  urge  that  such  appeal  was  not  

maintainable  having  been  filed  against  an  order  

passed in a review petition.

26. We, therefore, see no reason to interfere with  

the judgment and order of the High Court and the  

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appeal is accordingly dismissed, but without any  

order as to costs.            

27. The  Civil  Appeal  No.  ________  of  2009  (@  

Special Leave Petition No.3020 of 2009 filed by M/s  

Vasantha Communications Pvt. Limited and others is  

also disposed of on the basis of the findings in  

this judgment, without any order as to costs.

________________J. (ALTAMAS KABIR)

________________J. (CYRIAC JOSEPH)

New Delhi Dated:16.07.2009

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