Extent of DRT's power to restore possession to borrower / aggrieved party ?

In Ramco Super Leathers (P)Ltd. Vs. UCo. Bank 2007(2) DRTC 747 Mad. Madras High Court held that, merely because a secured creditor has taken possession, issued sale notice and also sale certificate in favour of the purchaser, does not render the tribunal powerless to restore the possession in favour of the borrower if the action taken by the secured creditor is found not in accordance with provisions of the Act and the rules framed thereunder and declared as null and void. Restoration of possession of secured asset is also possible in favour of a third party if the action taken by the secured creditor is not in consonance to the provisions of the Act because Section 17 can be invoked by any person aggrieved by the action under the Act. (Fakrudheen Haji Vs. State Bank of India: 2009(1) D.R.T.C. 221 Ker.) Under Sec. 17(3) of SARFAESI Act, if the Tribunal after scrutiny of action and perusing the evidence produced if any, comes to conclusion that, the action taken by secured creditor is not in consonance to the provisions of the Act, the tribunal is not powerless to order restoration of possession of the secured asset to borrower. This view is further fortified by Supreme Court in Authorised Officer, Indian Overseas Bank Vs. Ashok Saw Mill : (2009) 8 SCC 366 holding that, if the action of the secured creditor is not in consonance to the provisions of the Act, the DRT may set aside the same and restore the possession to the borrower in appropriate cases.

As a matter of fact the law on the subject is very clear as can be seen from the language employed in Sub-Sec.(3) of Sec.17 of the Act which is reproduced hereunder for a glance:

(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 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.

The purpose of taking possession is to sell secured asset to realise the debt. Hence sale is integral part of the possession and not separate action. For this reason possession is restored to borrower if he skipped off to challenge the possession by filing SA in the past. Even if secured creditor has taken actual possession u/s 14 of the Act he is bound to restore possession if sale is not in consonance to the provisions of the Act and the Rules.

The Tribunal has to scrutinise the action under Sec.17(2) based on the evidence produced by the parties to the proceedings under Sec.17(3) of SAEFAESI Act. If the Tribunal comes to conclusion that the action taken is in consonance to the provisions of the Act and the Rules framed thereunder the Tribunal may approve it and allow the secured creditor to go ahead with further action. On the other hand if the action of the secured creditor is not in consonance to the provisions of the Act and the Rules framed thereunder the Tribunal may order restoration of possession. The Tribunal can restore ‘status quo ante’ even if the property is sold or dealt with, pending proceedings under Sec.17 of the Act. The applicant can agitate all the issues relating to tenability of the action taken by the secured creditor under Sec.13(4) of the Act before DRT by filing an application under Sec.17 of the Act.

Suppose, secured creditor has taken possession of secured asset and  borrower filed SA challenging the legality of the possession taken (whether symbolic or actual)  and DRT approved the possession notice and dismissed the SA filed and thereafter the secured creditor has taken further steps to sell the asset and borrower again challenges the action of sale and DRT found that the sale is in violation of the provisions of the Act and the Rules framed there under then, the DRT at the most can set aside the action of sale but cannot order restoration of possession as the possession was earlier approved by it and it cannot sit over its own decision.