MIS TRANSCORE v. UNION OF INDIA AND ANR.

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A National Bank, submitted that the doctrine of election is for banks/ Fis. and not for borrowers. The reason is that a creditor has to see his debtor, it is the right of the bank to liquidate the asset which right is unfettered once a security or interest is created in favour of the bank/FI. [See Abdul Azeez v. Punjab National Bank, (2005) I 27CompCas5 I 4(Ker)]. Learned counsel. submitted that the purpose of enacting proviso to Section 19( I) is to bring in B Order XXIII CPC. Learned counsel submitted that the doctrine of election applies only in case of inconsistent remedies and not in case of additional remedies. He urged that withdrawal of an application could be a condition precedent for alternate remedy, however, it cannot be a condition precedent for taking recourse to an additional. remedy. Learned counsel urged that C unlike SICA, in the NPA Act, 2002 there is no proviso saving limitation, and, therefore, if the argument of the borrowers is accepted, it could lead to a situation where the banks' action under NPA Act would be time barred. In any event, NPA Act, according to the learned counsel, is a later enactment and, therefore, it shall prevail over the DRT Act.

D Ms. J.S. Wad, learned counsel for Central Bank of India, has adopted the above arguments advanced on. behalf of the various banks.

The heart of the matter is that NPA Act proceeds on the basis that an interest in the asset pledged or mortgaged with the bank or Fl is created in favour of the bank/ FI; that the borrower has become a Debtor, his liability has crystallized and that his account with the bank/ FI (which is an asset with the bank/FI) has become sub-standard.

Value of an asset in an inflationary economy is discounted by "time" factor. A right created in favour of the bank/ FI involves corresponding obligation on the part of the borrower to see that the value of the security does not depreciate with the passage of time which occurs due to his failure to repay the loan in time.

Keeping in mind the above circumstances, the NPA Act is enacted for quick enforcement of the security. The said Act deals with enforcement of the rights vested in the bank/FI. The NPA Act proceeds on the basis that security interest vests in the bank/FI. Sections 5 and 9 of NPA Act is also important for preservation of the value. of the assets of the banks/Fis. Quick recovery of debt is important. It is the object ofDRT Act as well as NPA Act. But under NPA Act, authority is given to the banks/Fis, which is not there in the DRT Act, to assign the secured interest to securitisation company/ H asset reconstruction company. In cases where the borrower has bought an

TRANSCORE v. U.0.1. [KAPADIA, .I.) 823 asset with the finance of the bank/ FI, the latter is treated as a lender and on assignment the securitisation company/ asset reconstruction company steps into the shoes of the lender bank/ FI and it can recover the lent amounts from the borrower.

According to Snell's Equity (Thirty-first edition) at page 777, a dual obligation could arise on the same transaction, namely, A's obligation to repay a sum of money to B or some other obligation. In such a case, B can sue for money or for breach of the obligation. However, B will often have some security which covers the obligation of A, say, in the form of an asset over which can exercise his rights. B may be entitled to this security either by law or by operation of common law principles or under the transaction C (contract). In addition, B may acquire a personal right of action against the third party. Security .over the asset (property) may be obtained by mortgage, charge, pledge, lien etc. Security in the form of right of action against a third party is known as guarantee. Broadly, there are three types of security over the asset. One is where the creditor obtains interest in the asset concerned (mortgage). Second is securities in which the rights of the creditor depends on possession of the asset (pledge/ lien). The third is charge where the creditor neither obtains ownership nor possession of the asset but the asset is appropriated to the satisfaction of the debt or obligation in question (charge). The dichotomy, which is of importance, is that more than one obligation could arise on the same transaction, namely, to repay the debt or to discharge some other obligation.

Therefore, when Section 13(4) talks about taking possession of the secured assets or management of the business of the borrower, it is because a right is created by the borrower in favour of the bank/ FI when he takes a loan secured by pledge, hypothecation, mortgage or charge. For example, when a company takes a loan and pledges its financial asset, it is the duty of that company to see that the margin between what the company borrows and the extent to which the loan is covered by the value of the financial asset hypothecated is retained. If the borrower company does not repay, becomes a defaulter and does not keep up the value of the financial asset which depletes then the borrower fails in its obligation which results in a mis-match between the asset and the liability in the books of the bank/FI. Therefore, Sections 5 and 9 talks of acquisition of the secured interest so that the balance sheet of the bank/Fl remains clean. Same applies to immovable property charged or mortgaged to the bank/Fl. These are some of the factors which the Authorised Officer of the bank/FI has to keep in mind when he gives notice H

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A under Section 13(2) of the NPA Act. Hence, equity, exists in the bank/Fl and not in the borrower. Therefore, apart from obligation to repay, the borrower undertakes to keep the margin and the value of the securities hypothecated so that there is no mis-match between the asset-liability in the books of the bank/FI. This obligation is different and distinct from the obligation to repay. It is the former obligation of the borrower which attracts the provisions of B NPA Act which seeks to enforce it by measures mentioned in Section 13(4) of NPA Act, which measures are not contemplated by ORT Act and, therefore, it is wrong to say that the two Acts provide parallel remedies as held by the judgment of the High Court in Mis Kalyani Sales Co .. As stated, the remedy under DRT Act falls short as compared to NPA Act which refers to acquisition C and assignment of the receivables to the asset reconstruction company and which authorizes banks/ Fis. to take possession or to take over management which is not there in the DRT Act. It is for this reason that NPA Act is treated as an additional remedy (Section 37), which is not inconsistent with the DRT Act.

D In the light of the above discussion, we now examine the doctrine of election. There are three elements of election, namely, existence of two or more remedies; inconsistencies between such remedies and a choice of one of them. If any one of the three elements is not there, the doctrine will not apply. According to American Jurisprudence, 2d, Vol. 25, page 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Equity (Thirty-first Edition, page 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application.

In our view, the judgments of the High Courts which have taken the view that the doctrine of election is applicable are erroneous and liable to be set aside.

We have already analysed the scheme of both the Acts. Basically, the NP A Act is enacted to enforce the interest in the financial assets which belongs to the bank/ FI by virtue of the contract between the parties or by operation of common law principles or by law. The very object of Section H

- • TRANSCORE v. U.O.I. [KAPADIA, J.] 825 13 of NPA Act is recovery by non-adjudicatory process. A secured asset under NPA Act is an asset in which interest is created by the borrower in favour of the bank/ FI and on that basis alone the NPA Act seeks to enforce the security interest by non-adjudicatory process. Essentially, the NPA Act deals with the rights of the secured creditor. The NPA Act proceeds on the basis that the debtor has failed not only to repay the debt, but he has also failed to maintain the level of margin and to maintain value of the security at a ievel is the other obligation of the debtor. It is this other obligation which invites applicability ofNPA Act. It is for this reason, that Sections 13(1) and 13(2) of the NPA Act proceeds on the basis that security interest in the bank/ FI; needs to be enforced expeditiously without the intervention of the court/ tribunal; that liability of the borrower has accrued and on account of default in repayment, the account of the borrower in the books of the bank has become non-perfonning. For the above reasons, NPA Act states that the enforcement could take place by non-adjudicatory process and that the said Act removes all fetters under the above circumstances on the rights of the secured creditor. D The question still remains as to the object behind insertion of the three provisos to Section 19(1) of DRT Act vi de amt:nding Act 30 of 2004. The DRT is a tribunal, it is the creature of the statute, it has no inherent power i'· which exists in the civil courts. Order XXIII Rule 1 (3) CPC states inter alia that where the court is satisfied that there are sufficient grounds for allowing the plaintiff to institute a fresh suit for the subject-matter of a suit or part of a claim then the civil court may, on such terms as it thinks fit, grant the plaintiff permission to withdraw the entire suit or such part of the claim with liberty to institute a fresh suit in respect thereof. Under Order XXIII Rule 1(1)(4)(b), in cases where a suit is withdrawn without the permission of the court, the plaintiff shall be precluded for instituting any fresh suit in respect of such subject-matter. Order XXIII Rule 2 states that any fresh suit instituted on permission granted shall not exclude limitation and the plaintiff should be bound by law of limitation as if the first suit had not been instituted. Order XXIII Rule 3 deals with compromise of suits. It states that where it is proved to the satisfaction of the court that a suit has been adjusted wholly or in part by any lawful agreement or compromise or where the defendant satisfies the plaintiff in respect of whole or any part of the subject-matter of the suit, the Court shall order such agreement, compromise or satisfaction to be recorded, and shall pass a decree in accordance therewith.

The object behind introducing the first proviso and the third proviso to H

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A Section 19(1) of the ORT Act is to align the provisions of ORT Act, the NPA Act and Order XXIII CPC. Let us assume for the sake of argument, that an 0.A. is filed in the ORT for recovery of an amount on a tenn loan, on credit facility and on hypothecation account. After filing ofO.A., on account of non disposal of the O.A. by the tribunal due to heavy backlog, the bank finds that one of the three accounts has become sub-standard/ loss, in such a case the bank can invoke the NPA Act with or without the pennission of the ORT. One cannot lose sight of the fact that even an application for withdrawal/ leave takes time for its disposal. As stated above, with inflation in the economy, value of the pledged property/ asset depreciate on day to day basis. If the borrower does not provide additional asset and the value of the asset pledged keeps on falling then to that extent the account becomes non-perfonning. Therefore, the bank/ FI is required to move under NPA Act expeditiously by taking one of the measures by Section 13(4) of the NPA Act. j\1oreover, Order XXIII CPC is an exception to the common law principle of non-suit, hence the proviso to Section 19(1) became a necessity.

D For the above reasons, we hold that withdrawal of the O.A. pending before the ORT under the ORT Act is not a pre-condition for taking recourse to NPA Act. H is for the bank/FI to exercise its discretion as to cases in which it may apply for leave and in cases where they may not apply for leave to withdraw. We do not wish to spell out those circumstances because the said first proviso to Section 19(1) is an enabling provision, which provision may deal with myriad circumstances which we do not wish to spell out herein.

(ii) On Point No. 2 on question of possession:

The short question under this head is whether recourse to take possession of the secured assets of the borrower under Section 13(4) of the NPA Act comprehends the power to take actual possession of the immovable property.

Mr. N.C. Sahni and Mr. Pankaj Gupta, learned advocates appearing on behalf of the respective borrowers submitted that Section 13(4) of the NPA Act empowers the secured creditor to take possession of the secured immovable assets of the borrower on expiry of sixty days and notice served under Section 13(2) of that Act. It is pointed out that in many cases, the banks/Fis. have taken actual physical possession whereas in other cases they have taken only a symbolic possession. Learned advocates submitted that in Kalyani Sales Co., the High Court has rightly held that if physical possession is taken on expiry of sixty days, the remedy of application under Section 17 of the NPA H Act by the borrower would become illusory and meaningless as the borrower

- TRANSCORE v. U.O.I. [KAPADIA, J.] 827 or the person in possession would be dispossessed even before adjudication of the objections by the tribunal. Learned advocates further submitted that under Section 13(8), the bank/Fl is prevented from selling the secured assets, if the dues of the secured creditor with all costs, charges and expenses are tendered to the secured creditor at any ti:ne before the date fixed for sale. Learned advocates pointed out that under Rule 8(1) of the 2002 Rules, a secured creditor is empowered to take possession as per notice appended in terms of Appendix IV. That notice cautions the borrower not to deal with the property. Learned advocates submitted that notice in terms of Rule 8(1) of the 2002 Rules operates as attachment. It contemplates a symbolic possession. Learned advocates submitted that actual physical possession of immovable assets can be taken under Rule 8(3), in cases where there is a vacant plot or C a property which is lying unattended, but where the immovable property is in actual physical possession of any person, the person in possession cannot be dispossessed by virtue of a notice under Rule 8(1); that actual physical possession is to be delivered only after confirmation of sale under Rule 9(6) read with Appendix V under which the authorised officer is empowered to deliver the property to the purchaser free from all encumbrances in terms of D Rule 9(9) of the 2002 Rules. Learned advocates, therefore, submitted that the High Court was right in holding that the borrower or any other person in possession of the immovable property cannot be physically dispossessed at the time of issuing notice under Section 13(4) of the NPA Act so as to defeat the adjudication of his claim by the ORT under Section' 17 of NPA Act, and E that, physical possession can be taken only after the sale is confirmed in terms of Rule 9(9) of the 2002 Rules.

We do not find any merits on the above contentions for the following reasons. F The word possession is a relative concept. It is not an absolute concept. The dichotomy between symbolic and physical possession does not find place in the Act. As stated above, there is a conceptual distinction between securities by which the creditor obtains ownership of or interest in the property concerned (mortgages) and securities where the creditor obtains neither an interest in nor possession of the property but the property is appropriated to the G satisfaction of the debt (charges). Basically, the NPA Act deals with the former type of securities under which the secured creditor, namely, the bank/ Fl obtains interest in the property concerned. It is for this reason that the NPA Act ousts the intervention of the courts/ tribunals. H

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A Keeping the above conceptual aspect in mind, we find that Section 13(4) of the NPA Act proceeds on the basis that the borrower, who is under a liability, has failed to discharge his liability within the period prescribed under Section 13(2), which enables the secured creditor to take recourse to one of the measures, namely, taking possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured assets. Section 13(4-A) refers to the word "possession" simpliciter. There is no dichotomy in sub-section (4-A) as pleaded on behalf of the borrowers. Under Rule 8 of the 2002 Rules, the authorised officer is empowered to take possession by delivering the possession notice prepared as nearly as possible in Appendix IV to the 2002 Rules. That notice is required to be affixed on the property. Rule 8 deals with sale of immovable secured assets. Appendix IV prescribes the form of possession notice. It inter alia states that notice is given to the borrower who has failed to repay the amount informing him and the public that the bank/fl has taken possession of the property under Section 13(4) read with Rule 9 of the 2002 Rules. Rule 9 relates to time of sale, issue of sale certificate and delivery of possession. D Rule 9(6) states that on confirmation of sale, if the terms of payment are complied with, the authorised officer shall issue a sale certificate in favour of the purchaser in the form given in Appendix V to the 2002 Rules. Rule 9(9) states that the authorised officer shall deliver the property. to the buyer free from all encumbrances known to the secured creditor or not known 'to E the secured creditor. (emphasis supplied). Section· 14 of the NPA Act states that where the possession of any secured asset is required to be taken by the secured creditor or if any of the secured asset is required to be sold or transferred, the- secured creditor may, for the purpose of taking possession, request in writing to the District Magistrate to take possession thereof. Section 17(1) of NPA Act refers to right Of appeal. Section 17(3) states that if the F ORT as an appellate authority after examining the facts and circumstances of the case comes to the conclusion that any of the measures under Section 13(4) taken by the secured creditor are not in accordance with the provisions of the Act, it inay by order declare that the recourse taken to any one or more measures is invalid, and consequently, restore possession to the borrower and can also restore management of the business of the borrower. Therefore, the scheme of Section 13(4) read with Section 17(3) shows that ifthe borrower is dispossessed, not in accordance with the provisions of the Act, then the ORT is entitled to put the clock back by restoring the status quo ante. Therefore, it cannot be said that if possession is taken before confirmation of sale, the rights of the borrower to get the dispute adjudicated upon is defeated by the authorised officer taking possession. As stated above, the NPA Act

" TRANSCORE v. U.0.1. [KAPADIA, J.] 829 provides for recovery of possession by non-adjudicatory process, therefore, to say that the rights of the borrower would be defeated without adjudication would be erroneous. Rule 8, undoubtedly, refers to sale of immovable secured asset. However, Rule 8(4) indicates that where possession is taken by the authorised officer before issuance of sale certificate under Rule 9, the authorised officer shall take steps for preservation and protection of secured assets till they are sold or otherwise disposed of. Under Section 13(8), if the dues of the secured cre~itor together with all costs, charges and expenses incurred by him are tendered to the creditor before the date fixed for sale or transfer, the asset shall not be sold or transferred. The costs, charges and expenses referred to in Section 13(8) will include costs, charges and expenses which the authorised officer incurs for preserving and protecting the secured assets till they are sold or disposed of in terms of Rule 8(4). Thus, Rule 8 deals with the stage anterior to the issuance of sale certificate and delivery of possession under Rule 9. Till the time of issuance of sale certificate, the authorised officer is like a court receiver under Order XL Rule I CPC. The court receiver can take symbolic possession and in appropriate cases where the court receiver finds that a third party interest is likely to be created overnight, he can take actual possession even prior to the decree. The authorized officer under Rule 8 has greater powers than even a court receiver , as security interest in the property is already created in favour of the banks/ Fis. That interest needs to be protected. Therefore, Rule 8 provides that till issuance of the sale certificate under Rule 9, the authorized officer shall take such steps as he deems fit to preserve the secured asset. It is well settled that third party interests are created overnight and in very many cases those third parties take up the defence of being a bona fide purchaser for value without notice. It is these types of disputes which are sought to be avoided by Rule 8 read with Rule 9 of the 2002 Rules. In the cir~umstances, the drawing of dichotomy between symbolic and actual possession does not find place in the scheme of the NPA Act read with the 2002 Rules.

(iii) On Point No. 3, on question of court fee:

·Whether ad valorem court fee prescribed under Rule 7 of the ORT (Procedure) Rules, 1993 is payable on an application under Section 17(1) of the NPA Act in the absence of any rule framed under the NPA Act.

Mr. N.C. Sahni supplemented by Mr. Pankaj Gupta, learned advocates appearing on behalf of the borrower submitted that by virtue of the ai:nending Act 30 of 2004 with effect from 11.11.2004, the persons aggrieved against H

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A the action of the bank or FI initiated under Section 13(4) of the NPA Act have a right to adjudication by way of an application to the DRT under Section 17(1) of the NPA Act. It is submitted that in exercise of powers conferred under Section 40(1) of the NPA Act, the Central Government has issued an Order called the "Securitisation and Reconstruction of Financial B Assets and Enforcement of Security Interest (Removal of Diffrculties) Order, 2004 ("Order 2004") making the provision for levying of fees for filing of appeals. This Order 2004 was issued on 6.4.2004. It is further pointed out that on 8.4.2004, this Court delivered its judgment in the case of Mardia Chemicals (supra). Clause (3) of the Order 2004 provides that the fee for filing of an appeal to DRT under Section 17(1) of the NPA Act shall be mutatis mutandis as provided for filing of an application to DRT under Section 19 of the DRT Act read with Rule 7 of the Debts Recovery Tribunal (Procedure) Rules, 1993 ("1993 Rules"). Learned advoc~tes urged that after the amending Act 30 of 2004 which came into force with effect from 11.11.2004 by which amendment was made to Section 17(1) ofNPA Act, the Order 2004 dated 6.4.2004 issued by the Central Government has become redundant because the amending provision stipulates filing of an application by the borrower under Section 17(1) ofNPA Act to the DRT challenging the action under Section 13(4) by filing an application along with payment of fees as may be prescribed. Learned advocates submitted that under Section 17( I) of NPA Act, as amended, a proviso is added which states that different fees may be prescribed for making an application by the borrower. It is further submitted that the word "prescribed" has been defined under Section 2(s) to mean prescribed by rules made under the NPA Act. It is urged that in the judgment of Mardia Chemicals (supra), this Court held that the remedy under Section 17 of NPA Act is not an appellate remedy. Clause (3) of the Order 2004 providing for fees for filing an appeal under the unamended provisions cannot, therefore, be made applicable to any application filed after 11.11.2004. Learned advocates submitted that NPA Act vide Section 17(1) of NPA Act read with Rule 7 of the 1993 Rules under DRT Act cannot form the basis to claim ad valorem court fee in terms of Rule 7 of the 1993 Rules, particularly after 11.11.2004 because, as stated above, this Court has held in G Mardia Chemicals (supra) that the remedy under Section 17(1) of NPA Act is the original remedy and not an appellate remedy. It is further submitted that after 11.11.2004, fees could be levied only vide Rules and not by an Order removing Difficulties.

We do not find any merits in the above contentions, for the following H reasons.

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It is true that Section 17(1) of the NPA Act states inter alia that a A borrower aggrieved by action taken under Section 13(4) may make an application along with fees, as may be prescribed to the DRT having jurisdiction in the matter. It is true that, the marginal note states that Section 17(1) is a right to appeal. In our view, the marginal note to Section 17( l) cannot control the text and the content of Section 17(1) which, as stated above, states that the borrower aggrieved by any of the measures in Section B 13(4) may make an application to the DRT. The judgment of this Court in Mardia Chemicals (supra) states that the DRT acts in an Original Jurisdiction under Section 17 of the NPA Act. In our opinion, as far as the levy of fee is concerned, the terminology makes no difference. In fact, the proviso to Section 17(1) indicates that different fees may be prescribed for making an C application by the borrower. The reason is obvious. Certain measures taken under Section 13(4) like taking over the management of the fee vis-a-vis the ... secured creditor taking possession of financial assets have to bear different fees. Each measure is ~quired to be separately charged to the borrower (applicant) for which different fees could be prescribed. The said proviso indicates that the tribunal under Section 17(1) exercises Original Jurisdiction D and, therefore, as far as the fees are concerned, the terminology of Oiiginal or appellate jurisdiction in the context of fees is irrelevant. Secondly, under the Order 2004 issued by the Central Government under Section 40 of the NPA Act, it is provided that the fee for filing an appeal to the DRT under Section 17(1) of NPA Act shall be mutat is mutandis as provided for filing an application to the DRT under Rule 7 of the 1993 Rules. The word mutatis mutandis indicates that a measure is adopted for assessing the fees required to be paid by the borrower when he applies by way of application to the DRT under Section 17(1) of NPA Act challenging the action taken under Section 13(4) of NPA Act by the secured creditor. Lastly, we do not find any merit in the argument advanced on behalf of the borrowers that since fees have not been prescribed by the rules after l l.l l.2004, fees cannot be levied on the basis of the Order 2004 which was there prior to 11.11.2004. The contention of the borrowers is that since Section 17(1) of NPA Act, as amended, provides for prescribing fees for an application under Section 17(1) and since no rule has been framed under the NPA Act after 11.11.2004 fees cannot be levied under the Order 2004 dated 6.4.2004 which, according to the borrower, has come to an end after 11.11.2004 with the enactment of the amending Act 30 of 2004.

We do not find any merit in this last argument also. In the case of Madeva Upendra Sinai and Ors. v. Union of India and Ors., reported in H

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A [1975] 3 SCC 765, one of the questions which arose for determination was whether the Central Government in the exercise of its power to remove difficulties under the Income Tax Act similar to Section 40 of the NPA Act was competent to supply a deficiency in the Act. Answering the above question, this Court held as follows:

B "36. This raises two questions: (l) Is this a 'difficulty' within the contemplation of clause (7) of the Regulation? (2) Is the Central Government in the exercise of its power under that clause competent to supply a deficiency or casus omissus of this nature ?

38Copy pinpoint38. For a proper appreciation of the points involved, it is necessary c to have a general idea of the nature and purpose of a "removal of difficulty clause" and the power conferred by it on the Government.

39Copy pinpoint39. To keep pace with the rapidly increasing responsibilities of a welfare democratie State, the Legislature has to tarn out a plethora of hurried legislation, the volume of which is often matched with its complexity. Under conditions of extreme pressure, with heavy demands on the time of the Legislature and the endurance and skill of the draftsman, it is well nigh impossible to foresee all the circumstances to deal with which a statute is enacted or to anticipate all the difficulties that might arise in its working due to peculiar local conditions or even a local law. This is particularly true when Parliament undertakes legislation which gives a new dimension to socio-economic activities of the State or extends the existing Indian laws to new territories or · areas freshly merged in the Union of India. In order to obviate the necessity of approaching the Legislature for removal of every difficulty, howsoever trivial, encountered in the enforcement of a F statute, by going through the time-consuming amendatory process, the legislature sometimes thinks it expedient to invest the Executive with a very limited power to make minor adaptations and peripheral adjustments in the statute, for making its implementation effective, withouttouching its substance. That is why the "removal of difficulty clause", once frowned upon and nick-named as "Henry VIII Clause" G in scornful commemoration of the absolutist ways in which that English King got the "difficulties" in enforcing his autocratic will be removed through the instrumentality of a servile Parliament, now finds acceptance as a practical necessity, in several Indian statutes of post independence era. H

TRANSCORE v. u.o.I. [KAPADIA, J.] 833

40Copy pinpoint40. Now let us turn to Clause (7) of the Regulation. It will be seen that the power given by it is not uncontrolled or unfettered. It is strictly circumscribed, and its use is conditioned and restricted. The existence or arising of a "difficulty" is the sine qua non for the exercise of the power. If this condition precedent is not satisfied as an objective fact, the power under this Clause cannot be invoked at all. Again, the '"difficulty" contemplated by the clause .must be a difficulty arising in giving effect to the provisions of the Act and not a difficulty arising aliunde, or an extraneous difficulty. Further, the Central Government can exercise the power under the clause only to the extent it is necessary for applying or giving effect to the Act, etc., and no further. It may slightly tinker with the Act to round off angularities, and smoothen the joints or remove minor obscurities to make it workable, but it cannot change, disfigure or do violence to the basic structure and primary features of the Act. In no case, can . it,. under the guise of removing a difficulty, change the scheme and essential provisions of the Act. D

41Copy pinpoint41. The above principles, partiCularly the distinction between a 'difficulty' which falls within the purview of the Removal of Difficulty Clause and one which falls outside it, finds ample illustration in the 1949 Order and the impugned provision of the 1962 Order which came up for consideration in Straw Products' case [ 1968] 2 ·SCR I. Excepting the reference to the corresponding provision of the 1922 E Act, the language of the 1949 Order was the same as that of the . unimpugned part of clause (3) of Order 2 of 1970 in the present case. The 1949 Order related to the removal of a difficulty which had arisen in giving effect to the provisions of Section 10(2)(vi) Proviso (c) and Section 10(5)(b) of the 1922 Act, corresponding to Section F 34(2)(i) and Section 43(6)(b) of the Act of 1961. This difficulty had arises because the income-tax laws of the merged States were ~ot repealed by the Indian Income-tax Act but by the Taxation Laws (Extension to Merged States and Amendment) Act 67 of 1949. Owing to this, the depreciation actually allowed under the laws of the merged . States could not be taken into account in computing the aggregate G depreciation allowance referred to in sub-section (2)(vi), proviso (c) · or the written down value under clause (b) of sub-section (5) of Section l 0 of the 1922 Act. If this difficulty had not been removed, anomalous results would have followed. The written down value of the assets acquired before the previous year would have been taken H

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A as the original cost of the assets without deduction of the depreciation actually allowed in the past under the State laws. This would have given to the assessees in the merged States, a benefit; inconsistently with the scheme of Section I 0 of the 1922 Act, exceeding in the aggregate even the original cost of the assets.

42Copy pinpoint42. The 1949 Order removed this difficulty. In terms, it did no more ·than directing that if under the income-tax· laws of a merged State any depreciation was actually allowed, it was to be taken into account in ascertaining the written down value of the assets. Far from supplanting or changing the essence of the essential provisions of the Act relating to depreciation and written-down value, it gave effect, life and meaning c to them."

In view of the above judgment of this Court in Madeva Upendra Sinai, we are of the view that the 2004 Order, in the present case, was issued with the object of supplying a deficiency, namely, levy of fees. By such levy D offees, the nature and scope of the NPA Act is not altered. It is not in dispute that the 2004 Order has been issued after the enactment of NPA Act. After the amending Act 30 of 2004, certain amendments have been made in Section 17(1) ofNPA Act. However, the 2004 Order dated 6.4.2004 does not, in any way, alter the scheme of the amended Act. It merely fills in the deficiency and, therefore, the 2004 Order will continue to operate even after the amending E Act 30 of 2004 and till rules are prescribed in terms of Section 2(s) of the NPA Act.

Before concluding, it is necessary to analyse the following two judgments of this Court in the light of what is stated above.

F In the case of A.P. State Financial Corporation v. Mis Gar Re-Rolling Mills and Anr. (supra) it has been held that Section 29 of the State Financial Corporation Act, 1951 ("SFC Act") provides for the rights and remedies as also the procedure for enforcement of the rights. It is a complete Code. It is open to the Corporation to act under Section 29 to realise its dues from the defaulter concerned by following the procedure prescribed thereunder. The Corporation does not require the assistance of the court to enforce its rights while invoking the provisions of Section 29. In the said judgment, it has been further held that Section 3 I has been enacted to take care of a situation where any industrial concern, in breach of any agreement, makes default in repayment of the loan or advance or the Corporation requires immediate repayment which the defaulter fails to make. This Court, therefore, held that Section 31

TRANSCORE v. U.0.1. [KAPADIA, J.] 835

provides for substantive relief in the nature of an application for attachment of property in execution of a decree before the judgment and that on conjoint reading of Sections 29 and 31, in case of default in repayment/breach of an agreement, the Corporation has two remedies under the SFC Act against the defaulter, one under Section 29 and another under Section 31. This Court further held that the doctrine of election would not be attracted under the SFC Act in view of the expression "without prejudice to the provisions of B Section 29" being used in Section 31. However, this Court observed that the Corporation has a right to choose initially whether to proceed under Section 29 or Section 31, but its rights under Section 29 are not extinguished, if it decides to take recourse to Section 31. The Corporation can abandon the proceedings under Section 31 at any stage. This Court further held that a C decree under Section 31 is not a money decree and, therefore, recourse to Section 31 cannot debar the Corporation from taking recourse to Section 29 by not pursuing Section 3 t. It is also observed that debtor cannot claim equity.

In our view, the judgment in A.P. State Financial Corporation (supra) D has no application to the present case. Under the SFC Act, Section 31 uses the expression "without prejudice to the provisions of Section 29'', therefore, it is held, in the above judgment, that Section 29 is wider in scope than Section 31 which concerns attachment before judgment. Sections 29 and 31 find place in the same Act. Section 31 operates in an area carved out of its preceding Section 29 of the SFC Act. On the other hand, in the p~esent case, we have two separate enactments, namely, the ORT Act, 1993 and the NPA Act, 2002. Further, the ORT Act does not deal with assignment of an asset by the bank/FI to the asset reconstruction company/ securitisation company. This can be done only under the NPA Act. Under the NPA Act, the asset reconstruction company/ securitisation company can manage and reconstruct the asset. The said company can even step into the shoes of the lender bank/ FI, therefore, the remedy under NPA Act is an additional remedy, as stated in Section 37 of NPA Act. The NPA Act is in addition to the ORT Act, therefore, the scheme of the SFC Act is different from the integrated scheme of the ORT Act and the NPA Act. In the circumstances, the judgment of this G Court in A.P. State Financial Corporation (supra) has no application.

In the case of National Insurance Co. Ltd. v. Maston and Anr. (supra) this Court has held that on the language of Section 167 of the Motor Vehicles A.ct, 1988 ("MY Act"), and going by the principles of election of remedies, a claimant (worker) opting to proceed under the Workmen's Compensation H

p. 836 Copy page pinpoint

A Act, 1923 (" 1923 Act") cannot take recourse to the provisions to the MY Act except to the extent stated in Section 167 of the MY Act. This judgment has no application to the facts of the present case. As held in the above judgment of National Insurance Co. v. Mastan (supra), Section 167 of the MY Act statutorily provides for an option to the claimant stating that where death or bodily injury gives rise to a claim for compensation under the MY A<:t as B also under the 1923 Act, the pr~son entitled to compensation may, without prejudice to the provisions of Chapter X, can claim such compensation under either of the two Acts but not under both. Such a section is not there in the case before us and, therefore, the judgment in the case of National Insurance Co. Ltd v. Mastan (supra) has no application. ·c Mr. Yiswanathan, learned counsel appearing for Mis Transcore seeks time for filing an application under Section 17 of the NPA Act. He prays for continuation of the interim order dated 16.9.2005 granted by this Court by which confirmation of sale has been stayed. Since the matter was pending before this Court in appeal, we extend the interim order for four weeks from D the date of the judgment in Civil Appeal No. 3228 of 2006.

Accordingly, we answer the above three questions in the affinnative that is in favour of the banks/Fis. (secured creditors) and, accordingly, the borrower's appeal/I.A. in this Court stands dismissed whereas the appeal/I.A. filed by the banks/Fis. stands allowed with no order as to costs.

NJ. Banks/Fi's appeal/I.A. allowed Borrower's appeal/IA dismissed.