Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: s.13(4) – Grievance of debtor was that after the creditor issued the notice under s.13(2), the debtor made a representation asking for a reschedulement of the loan which the creditor neither considered nor communicated the reasons for non-acceptance thereof – Whether recovery proceedings were in breach of s.13(3A) for failure of the creditor to reply to the representation of the debtor and for want of a reasoned order – Held: s.13(4) envisages that if debt is classified as NPA, the creditor may by notice in writing require the debtor to discharge his liabilities within 60 days – After that debtor may make a representation and creditor is then bound to consider the representation and communicate the reasons for non-acceptance of representation within 15 days – When debtor fails to discharge his liability in full, the creditor may take any of the actions under sub-section (4) which include taking over the possession of secured assets – In the instant case, the creditor was induced by the debtor not to take action against them through assurances and promises – The creditor entered into negotiations for the settlement of the dues and even accepted cheques in repayment much after the notice under s.13(2) and after the debtor’s letter of representation – Many opportunities were granted by the creditor to the debtor to repay the debt which were all met by proposals for extension of time – The debtor ignored the symbolic possession taken over by the creditor and continued to negotiate and even gave six cheques which were dishonoured – The debtor then gave a final letter of undertaking agreeing that the creditor could take over possession of the assets if the debt was not repaid – All along, the debtor’s response has been that of seeking extension of time to pay, with the usual unfulfilled promise of repayment – In the fact and circumstances of this case, the debtor is not entitled to the discretionary relief under Art.226 of the Constitution which is indeed an equitable relief – Equity – Constitution of India – Art. 226. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: s.13(3A) – Purpose of introduction of s.13(3A) – Held: s.13(3A) was introduced with a plain intention to introduce a pause for the creditor to rethink and reconsider the action proposed by the debtor. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: s. 13(3A) – Whether s.13(3A) is mandatory or directory in nature – There is no doubt that if a reply with reasons is an integral and indispensable part of the statutory scheme, the Courts would not excuse a departure from it – But, on the other hand, if the reply is merely a direction and not of substance to the scheme, the non-compliance may be excused – The language of sub-section (3A) is clearly impulsive – It states that the secured creditor “shall consider such representation or objection and further, if such representation or objection is not acceptable or tenable, he shall communicate the reasons for nonacceptance” thereof – There is no reason to marginalize or dilute the impact of the use of the imperative ‘shall’ by reading it as ‘may’ – The word ‘shall’ invariably raises a presumption that the particular provision is imperative – However, in the instant case, failure to furnish a reply to the representation is not of much significance since the creditor undoubtedly considered the representation and the proposal for repayment made therein and in fact granted sufficient opportunity and time to the debtor to repay the debt without any avail – Therefore, in the fact and circumstances of this case, the debtor is not entitled to the discretionary relief – Interpretation of statutes. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: s. 31(i) – Plea of debtor that portion of land mortgaged by debtor as security interest consisted of agricultural land to which s. 31(i) does not apply and, therefore, land could not be recovered – Tenability of – Held: s.31(i) is intended to protect agricultural land held for agricultural purposes by agriculturists from the extraordinary provisions of this Act, which provides for enforcement of security interest without intervention of the Court – The plain intention of the provision is to exempt agricultural land from the provisions of the Act – In other words, the creditor cannot enforce any security interest created in his favour without intervention of the Court or Tribunal, if such security interest is in respect of agricultural land – The exemption thus protects agriculturists from losing their source of livelihood and income i.e. the agricultural land, under the drastic provision of the Act – In the instant case, security interest was created in respect of several parcels of land, which were meant to be a part of single unit i.e. the five star hotel in Goa – Some parcels of land claimed as agricultural land were apparently purchased by the debtor from agriculturists and were entered as agricultural lands in the revenue records – The debtor applied to the revenue authorities for the conversion of these lands to non-agricultural lands which is pending till date due to policy decision – The land in question is not an agricultural land – The High Court mis-directed itself in holding that the land was an agricultural land merely because it stood as such in the revenue entries, even though the application made for such conversation lies pending till date. Interpretation of statutes: Mandatory provision – A provision which requires reasons to be furnished must be considered as mandatory – Such a provision is an integral part of the duty to act fairly and reasonably and not fancifully. Constitution of India: Plea that s.31(i) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is beyond the legislative competence of Parliament – Held: The validity of s.31(i) which deals with security interest created over agricultural land is an integral part of the Act and cannot be questioned on the ground of legislative competence. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: s.14 – Whether the creditor could maintain an application of possession under s.14 of the Act; even though it had taken over only symbolic possession before the sale of the property to the auction purchaser – Held: In the instant case, the creditor did not have actual possession of the secured asset but only a constructive or symbolic possession – The transfer of the secured asset by the creditor, therefore, cannot be construed to be a complete transfer as contemplated by s.8 of the Transfer of 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. Fraud: Auction purchaser, allegation of collusion – Finding by High Court that there was fraud and collusion between the creditor and the auction purchaser based on fact that there was pending dispute between the parties and still he went ahead and made a bid for the property – Held: A risk of this kind taken up by an intending purchaser cannot lead to inference of collusion.