Holding

The ORT has jurisdiction to scrutinise and set aside any action taken by a secured creditor under Section 13(4) of the SARFAESI Act, including subsequent sales, and may restore possession to the borrower.

Summary

The Authorized Officer of Indian Overseas Bank (IOB) sought to enforce its security interest over the assets of Mis. Ashok Saw Mill under Section 13(4) of the SARFAESI Act after the borrower defaulted on loans, leading to possession and eventual sale of assets. The borrower challenged the actions before the High Court and the Debts Recovery Tribunal (ORT), arguing that the ORT could not entertain applications concerning post‑Section 13(4) events such as the sale. The Supreme Court examined the legislative intent of the SARFAESI Act, particularly the safeguards in Section 17, and held that the ORT’s jurisdiction extends to reviewing any measures taken under Section 13(4), including subsequent sales, and can restore possession to the borrower. The Court also dismissed the appellants’ contention that the appeal against the review petition was non‑maintainable. Consequently, the Supreme Court dismissed the appeal, upholding the High Court’s order.

Issues considered

The extent of the Debts Recovery Tribunal's jurisdiction under Section 17 of the SARFAESI Act to review post‑Section 13(4) actions, including asset sales.
Whether an appeal against a review petition is maintainable under Order 47 Rule 7 of the CPC.
Interpretation of the amendments to Sections 13 and 17 of the SARFAESI Act in light of the Mardia Chemicals decision.

Legislation cited

Limitation Act
Recovery of Debts Due to Banks and Financial Institutions Act, 1993
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002s. 13(2), s. 13(3), s. 13(3A), s. 13(4), s. 17(1), s. 17(2), s. 17(3), s. 17(4), s. 17(5), s. 17(6), s. 17(7)
Transfer of Property Act, 1882s. 69, s. 69A

Subjects

SARFAESI ActSection 13Section 17Debts Recovery Tribunaljurisdictionpost‑Section 13(4) actionsrestoration of possessionsecured creditorNPAappeal maintainability

Judgment

[2009] 11 S.C.R. 599

AUTHORIZED OFFICER, INDIAN OVERSEAS BANK AND A
ANR.
v.
MIS. ASHOK SAW MILL
(Civil Appeal No. 4429 of 2009)
JULY 16, 2009 .B

[ALTAMAS KABIR AND CYRIAC JOSEPH, JJ.]
..
•• Securitisation and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002 - s.13(4) and C
s. 17 - Jurisdiction of Debts Recovery Tribunal (ORT) to
interfere with the action taken by secured creditor in terms of
s.13(4) - Held: Action taken by secured creditor in terms of
s.13(4) is open to scrutiny and can not only be set aside but
even the status quo ante can be restored by the ·oRT. D
The present appeals arise out of action take by
secured creditor in terms of. Section 13(4) of the
Securitisation and Reconstruction of Financial Asse.ts
and Enforcement of Security Interest Act, 20.02 E
(SARFAESI Act).

The main question which arose for consideration in
the present appeals was whether the Debts Recovery
Tribunal (ORT) would have jurisdiction to consider and
adjudicate with regard to post Section 13(4) eve.llts or F
whether its scope in terms of Section 17 of the SARFAESI
Act would be confined to the stage contemplated under
Section 13(4). An additional question with regard to
maintainability of the appeal also arose for consi~eration
before this Court. G

Dismissing the main appeal and on that basis
disposing of the connected appeal, the Court ·

599 H
600 SUPREME COURT REPORTS [2009] 11 S.C.R.

.,~
A HELD: 1.1. While enacting the Securitisation and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002 (SARFAESI Act), the
Legislature was concerned with measures to regulate
securitisation and reconstruction of financial assets and
B 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
C non-performing assets by adopting measures for
recovery or reconstruction. The provisions of Section 13
enable the secured creditors, such as Banks and

0
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. [Para 21] [614-G-H; 615-A-B]

E 1.2. 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,
F 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 ORT
having jurisdiction in the matter within 45 days from the
date of such measures having taken for the reliefs
G indicated in Sub-Section (3) thereof. [Para 22] [615-C-D]

1.3. The intention of the legislature is clear that while
the Banks and Financial Institutions have been vested
••
with stringent powers for recovery of their dues,

H
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 601
·. v. ASHOK SAW MILL
,. safeguards have also been provided for rectifying any A
"
· error or wrongful use of such powers by vesting the ORT
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 B
the authority vested in DRT under Sub-Section (3) of
Section 17 necessarily implies that the ORT 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 inc,luding Sub-Section (3) in c
Section 17 has gone to the extent of vesting the ORT with
a~thority to even set aside a transaction including s ..de
rahd to resto re possession to the borrower in appropriate
1

cases. Resultantly, the submissions advanced that the
dRJ has no jurisdiction to deal with a post 13(4) situation, D
cannot be accepted. [Para 23] [615-E-H]

1.4: It cannot be said that the ORT had no jurisdiction
to interfere with the 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 E
•contemplates that .the action taken by a secured creditor
1
in terms of Section 13(4) is open to scrutiny and can not
only be set aside but even the status quo ante can be
.. restored by the ORT. [Para 24] [616-C-D]
·~ F
Mardia Chemicals Ltd. & Ors. v. Union of India & Ors.
(2004) 4 SCC 311; Transcore v. Union of India & Anr. [(2008)
1 SCC 125]; UCO Bank,Churchgate Branch v. Mis Kanji
Manji Kothari & Company and its partners [Decision
rendered by Bombay High Court on 19-12-2007 in Writ G
Petition No.3566 of 2007]; Indian Overseas Bank & Ors. v.
G.S.Rajshekarn (2008) 4 MLJ 1012; Ramco Super Leathers
'
? Ltd. & Anr. v. UCO Bank & Anr. (2007) 5 MLJ 986 and Mis.
Lakshmi Shankar Miffs (P)Ltd. v. The Authorized Officer I
Chief Manager, Indian Bank & Ors. (2008) 2 LW 381, referred
H
'
602 SUPREME COURT REPORTS [2009] 11 S.C.R.

A to.
2. 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
8 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. [Para 25] [616-E-FJ •
c Case Law Reference:

(2004) 4 sec 311 referred to Para 6

c2008) 1 sec 12s referred to Para 6

D (2008) 4 MLJ 1012 referred to Para 13
(2007) 5 MLJ 986 referred to Para 13
(2008) 2 LW 381 referred to Para 13

E CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4429 of 2009.

From the Judgment & Order dated 1.9.2008 of the High
Court of Judicature at Madras in W.A. 926 of 2008.

F WITH
C.A. No. 4433 of 2009.

V.T. Gopalan, Altaf Ahmed, F.B. Benjamin Garg, M.A.
Chinnasamy, K. Krishna Kumar, Preetam Shah, Malini Poduval,
G Babita Sant, C.K. Rai, Anindita Popli, Prateeksh Kurup for the
Appellants.

S. Sethuraman, S. Thananjayan for the Respondents.
..•
The Judgment of the Court was delivered by
H
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 603.
v. ASHOK SAW MILL
:..1- ALTAMAS KABIR, J. 1. Leave granted in both the A
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
B
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
't initiated action against them under the provisions of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (hereinafter referred
c
to as 'the SARFAESI Act') and issued separate demand
notices to the respondent partnership firm and its stster
_, 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. D
><
" 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 securitd assets on 4th December, 2002. The said action E
of the Bank, as also the vires of the SARFAESI Act, were
challenged 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 F
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 ORT'), within
30 days. Since, despite such liberty, the respondent firm did
G
not approach the ORT, 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
H
604 SUPREME COURT REPORTS [2009) 11 S.C.R.

A 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 ground that it was unable to move
the ORT in view of the expiry of the period of limitation
prescribed under the Act. After hearing the parties, the High
B 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 Mis. Ashok Woodworks, filed
SARFAESI Application No.74 of 2007 before the Debts
C 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
D 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 same was
admitted and all proceedings in S.A. No.74 of 2007 were
E 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
F 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
G 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 ORT.
Subsequently, despite the pendency of the review petition, the
H respondent firm withdrew S.A. No.74 of 2007. and filed a fresh
AUTHORIZBD OFFICER, INDIAN OVERSEAS BANK 605
v. ASHOK SAW MILL [ALTAMAS KABIR, J.]
J~
application being S.A. No. 104 of 2007. The review petition A
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
B
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.
'
f
6. Appearing for the appellant Bank, Mr. V.T. Gopalan,
learned Senior Advocate, urged that before the learned,Slngle c
Judge it had been contended that the provisions of the
SARFAESI Act being similar to an English mortgage, on the
J.
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 D
• deemed fit and proper. It had also been submitted that despite
liberty having been granted to the respondent firm to move the
ORT 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 E
' 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
F
under Section 13(4) of the Act could not be challenged before
the ORT 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) f SCC 125], where the same view was reiterated.
G
7. Mr. Gopalan submitted that a Division Bench decision
;:;
of the Bombay High Court rendered in UCO Bank, Churchgate
Branch Vs. Mis. 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 H
606 SUPREME COURT REPORTS (2009) 11 S.C.R.

·\~
A 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
B 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
c the ORT is entitled to consider 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 ORT.
D
8. Mr. Gopalan submitted that the scope of the inquiry .
before the ORT 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
E or to transfer the interest therein in any manner whatsoever,
could not be made the subject matter of inquiry before the ORT. ."
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 ;
i
F 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. Gopalan submitted that the
SARFAESI Act neither contemplates restoration of possession
of the secured assets by efflux of time nor does it place a
G
mandate on the secured creditor to dispose of the secured
assets within a specified period. It was urged that since the r,
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
H
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 607
v. ASHOK SAW MILL [ALTAMAS KABIR, J.]
_J-
empowered under Rule 8 of the Security Interest (Enforcement) A
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
B
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 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 b~ set aside.
c
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 D
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 E
'· as a No11-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 period of limitation is prescribed or contemplated for F
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.
·; G
11. Mr. Ahmed submitted that Section 34 gives the
;J
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 H
608 SUPREME COURT REPORTS [2009] 11 S.C.R.

A 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-Sections
B (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
c 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 reli~d on two decisions of the Madras High Court in (1)
Indian 0verseas Bank & Ors. Vs. G. S. Rajshekam, [(2008) 4
D 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 Mis. Lakshmi
Shankar Mills (P) Ltd. Vs. The Authorized Officer/Chief
Manager, Indian Bank & Ors., ((2008) 2 LW 381]. Mr.
E Sethumaran submitted that after considering the provisions of
Section 17 in detail, 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
F 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.
G
14. The main question which falls for determination in this
appeal is whether the ORT 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
H confined to the stage contemplated under Section 13(4), as
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 609
v. ASHOK SAW MILL [ALTAMAS KABIR, J.]
_,,
,_
contended on behalf of the appellants. An additional question A
with regard to the maintainability of the appeal will have to be
taken i~to 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
B
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 c
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 b·ecome necessary to make amendments
in Sections 13 and 17 of the Act since it had been held that D
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 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- E
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, F
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 ORT at any stage
against any measure taken by the secured creditor under Sub- G
Section (4) of Section 13 which were not in conformity therewith
;i 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 exe.rcise
control over the management of the business of the borrower H
610 SUPREME COURT REPORTS (2009] 11 S.C.R.

... ~
A 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
8
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 Ill of the Act which deals
C 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)
D Notwithstanding anything contained in section 69 or
section 69A 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
E 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
.
i-
F 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
G 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
H creditor in the event of non-payment of secured debts by
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 611

·-
...-
v. ASHOK SAW MILL [ALTAMAS KABIR, J.]

the borrower. A

(3A) If, on receipt of the notice under sub-section (2),
the borrower makes any representation or raises any
objection, the secured cred.itor shall consider such
representation or objection and if the secured creditor
B
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.
c
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 D
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
E
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; F

(b) take over the management of the secured assets
of the borrower including the right to transfer by way of
lease, assignmentor sale and realise the secured asset;
G
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 furth~r that where the management of H
612 SUPREME COURT REPORTS [2009] 11 S.C.R.

A 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
B
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
c 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."

0 20. The other relevant provision which is Section 17 is also
included in Chapter Ill 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
E effected:

"17. Right to appeal.-(1) Any person (including
borrower), aggrieved by any of the measures referred to
in sub-section (4) of sectton 13 taken by the secured
creditor or his authorised officer under this C.hapter, [may
F 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.

G 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
H borrower by the secured creditor for not having accepted
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 613
v. ASHOK SAW MILL [ALTAMAS KABIR, J.]
...·'. his representation or objection or the likely action of the A
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.]
B
[(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.
c
(3) If, the Debts Recovery Tribunal, after examining the
iacts 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 D
~ 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 E
to in sub-section (4) of section 13 taken by the secured
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 F
necessary in relation to any oUbe 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 G
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 mor~ of the measures specified under sub-
section (4) of section 13 to recover his secured debt. H
614 SUPREME COURT REPORTS [2009) 11 S.C.R.

-•...
A (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
B
time to time, extend the said period for reasons to be
recorded in writing, so, howewer, that the total [leriod of
. pendency of the application with the Debts Recovery
Tribunal, shall not exceed four months from the date of
i
making of such application made under sub-section (1).
c
(6) If the application is not disposed of by the Debts
Recovery Tribunal within the 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,
D 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 dispos31 of the pending application by the
E Debts Recovery Tribunal.

(7) Save as otherwise provided in this Act, the Debts
~ecovery 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
F
Act, 1993 (51 of 1993) and the rules made thereunder.]"

21. It is clear that while enacting the SARFAESI Act the
Legislature was concerned wit~ measures to regulate
securitisation and reconstruction of financial assets and
G 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
H measures for recovery or reconstruction. The provisions of
AUTHORIZED OFFICER, INDIAN OVERSEAS BANK 61'5
v. ASHOK SAW MILL [ALTAMAS KABIR, J.]
. .....
,
Section 13 enable th.e secured creditors, such as Banks and A
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 B
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 c
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 ORT
having jurisdiction in the matter within 45 days from the date of
such measures having taken for the reliefs indicated in Sub- D
.4 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 E
have also been provided for rectifying any error or wrongful use
of such powers by vesting the ORT 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
F
consequences of the authority vested in ORT under Sub-
Section (3) of Section 17 necessarily implies that the ORT 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 ORT with authority to even G
set aside a transaction 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 ORT has no jurisdiction to deal with a post 13(4)
situation, cannot be accepted. The dichotomy in the views H
616 SUPREME COURT REPORTS [2009] 11 S.C.R.

A 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
B appellants to resist S .A. No.104 of 2007 preferred by the
respondents before the ORT 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
C made on behalf of the appellants that the ORT had no
jurisdiction to interfere with the 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
D 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
ORT.

25. The other point regarding the maintainability of the
E 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
F 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 appeal is
accordingly dismissed, but without any order as to costs.

G 27. The Civil Appeal No. of 2009 (@ Special
Leave Petition No.3020 of 2009 filed by Mis 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.

H 8.8.8. Appeals disposed of.