2024:KER:4166
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
WEDNESDAY, THE 10TH DAY OF JANUARY 2024/20TH POUSHA, 1945
WP(C) NO. 33707 OF 2023
PETITIONER:
ABDUL AZEEZ,
AGED 68 YEARS
S/O. PAREETHU, VADAPPILLY HOUSE,
AMBATTUKAVU, ALUVA WEST VILLAGE,
THAIKKKATTUKARA P O,
ERNAKULAM DISTRICT, PIN – 683106
BY ADVS.
P.CHANDRASEKHAR
AYPE JOSEPH
MERIN ROSE
RESPONDENTS:
1 THE AUTHORIZED OFFICER,PHOENIX ARC. LTD,
REGISTERED OFFICE, 5TH FLOOR,
DANI CORPORATION PARK, 158, CST ROAD,
KALINA, SANTACRUZ(E) MUMBAI - 400098
2 ADDL.R2 STATE OF KERALA
REPRESENTED BY ADDITIONAL CHIEF SECRETARY,
DEPARTMENT OF REVENUE, GOVERNMENT SECRETARIAT,
THIRUVANANTHAPURAM.
(ADDL.R2 IS IMPLEADED AS PER ORDER DATED
10.012024 IN IA.1/2024)
BY ADVS.
A.KEVIN THOMAS
A.V.THOMAS (SR.)(T-49)
NIDHI SAM JOHNS(K/211/2005)
LIJO JOSEPH (THOPPIL)(K/000537/2013)
THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR
ADMISSION ON 10.01.2024, ALONG WITH OP (DRT).453/2023,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:2:
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
WEDNESDAY, THE 10TH DAY OF JANUARY 2024/20TH POUSHA, 1945
OP (DRT) NO. 453 OF 2023
SA 66/2018 OF DEBT RECOVERY TRIBUNAL, ERNAKULAM
PETITIONER:
ABDUL AZEEZ
AGED 70 YEARS
S/O. PAREED, VADAPPILLY HOUSE,
AMBATTUKAVU, ALUVA WEST VILLAGE,
THAIKKATTUKARA PO ,
ERNAKULAM DISTRICT., PIN – 683106
BY ADVS.
AYPE JOSEPH
MERIN ROSE
RESPONDENT:
THE AUTHORIZED OFFICER
PHOENIX ARC. LTD., REGISTERED OFFICE,
5TH FLOOR, DANI CORPORATION PARK, 158,
CST ROAD, KALINA, SANTACRUZ(E) MUMBAI.,
PIN – 400098
BY ADVS.
NIDHI SAM JOHN
LIJO JOSEPH (THOPPIL)(K/000537/2013)
A.KEVIN THOMAS(K/639/2014)
THIS OP (DEBT RECOVERY TRIBUNAL) HAVING COME UP FOR
ADMISSION ON 10.01.2024, ALONG WITH WP(C).33707/2023,
THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:3:
CR
N. NAGARESH, J.
`````````````````````````````````````````````````````````````
W.P.(C) No.33707 of 2023
and OP(DRT) No.453 of 2023
`````````````````````````````````````````````````````````````
Dated this the 10th day of January, 2024
JUDGMENT
~~~~~~~~~
The petitioner in W.P.(C) No.33707/2023, who is a
Class A Contractor approved by the Government of Kerala,
has filed this writ petition seeking to set aside Ext.P3 order
passed by the Chief Judicial Magistrate, Thrissur. Ext.P3
order has been passed by the Chief Judicial Magistrate,
Thrissur in MC No.441/2023 filed by the respondent-Asset
Reconstruction Company. By Ext.P3 order, the Chief
Judicial Magistrate has appointed an Advocate
Commissioner to assist the Company to take possession of
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:4:
the petition schedule property, invoking Section 14 of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002.
2. The petitioner had availed financial advance from
the South Indian Bank. The petitioner met with an accident
in the year 2015 and was under continued treatment and
had to undergo a major surgery. As the petitioner defaulted
payments, the Bank invoked the provisions of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 to recover the
amounts due from the petitioner.
3. The petitioner was informed that the assets and
liabilities in respect of the loan account of the petitioner had
been assigned to the respondent-Asset Reconstruction
Company on 17.03.2017 as per Ext.P2. On 06.07.2017, the
respondent informed the petitioner that symbolic possession
of the secured asset has been taken. The petitioner hence
filed SA No.66/2018 before the Debts Recovery Tribunal-I,
Ernakulam, which is pending.
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:5:
4. It is during the pendency of SA No.66/2018 that
the respondent filed MC No.441/2023 before the Chief
Judicial Magistrate's Court. The counsel for the petitioner
argued that MC No.441/2023 is not maintainable. Ext.P2
agreement assigning the secured assets to the respondent-
Asset Reconstruction Company, is not enforceable. Ext.P2
assignment deed is not executed on sufficient stamp paper.
Ext.P2 is in violation of the provisions contained in the Kerala
Stamp Act, 1959. The respondent is not a State or
instrumentality of the State. The respondent is therefore not
exempted from paying stamp duty.
5. The counsel for the petitioner argued that stamp
duty at the rate of 8% has to be paid on Ext.P2
assignment/agreement in view of Article 22 in the Kerala
Stamp Act. The respondent has paid only ₹500/- towards
stamp duty. Therefore, Ext.P2 cannot be relied upon.
6. The counsel for the petitioner further pointed out
that the Asset Reconstruction Company as contemplated
under Section 3 of the Securitisation and Reconstruction of
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:6:
Financial Assets and Enforcement of Security Interest Act,
2002 should be a Trust. The respondent has not produced
any document to show that the respondent is a Trust.
7. When the petitioner filed IA No.2614/2023 praying
to stay all further proceedings pursuant to a dispossession
notice, the Debts Recovery Tribunal dismissed the IA holding
that the petitioner has miserably failed to make out a prima
facie case so as to get the relief sought for in the IA. The
petitioner therefore filed OP(DRT) No.453/2023 seeking to
set aside Ext.P3 order dated 24.08.2023 in IA No.2614/2023
in SA No.66/2018.
8. In the OP(DRT), the petitioner contended that the
notice of dispossession has been issued by the respondent
without following the statutory requirements under the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002. The petitioner
had already filed a proposal for One Time Settlement. The
petitioner requested the respondent to consider his case
compassionately since he could not continue the work due to
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:7:
the fact that huge amount was payable to him by the Kerala
Water Authority.
9. Standing Counsel entered appearance on behalf
of the respondents and resisted the writ petition and
OP(DRT). On behalf of the respondent, it is stated that there
is no provision under the Kerala Stamp Act, 1969 pertaining
to assignment of debts. What is transferred under Ext.P1 is
only the debt along with right to enforce the underline
securities under law. No conveyance of property has taken
place. The reliance on Section 25 of the Kerala Stamp Act is
therefore highly deceptive.
10. The counsel for the respondent submitted that the
NCLT has passed Ext.P5 order dismissing a petition filed by
the respondent. The said order is illegal and the respondent
has challenged Ext.P5 order in appeal.
11. The counsel for the respondent further urged that
no prejudice will be caused to the petitioner due to deficient
stamp duty. The petitioner had filed SA No.66/2018. The
Debts Recovery Tribunal granted a conditional stay on
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:8:
payment of ₹25 lakhs on or before 28.02.2018 and ₹75 lakhs
on or before 30.03.2018. The petitioner did not comply with
the conditions in the order.
12. The counsel for the respondent further submitted
that though the Advocate Commissioner attempted to take
physical possession of the residential properties of the
petitioner and another mortgagor, she was met with stiff
resistance from the petitioner and others. The writ petition
and the OP(DRT) are therefore liable to be dismissed,
contended the counsel for the petitioners.
13. I have heard the learned counsel for the
petitioners and the learned Standing Counsel for the
respondents.
14. The petitioner alleged that Ext.P2 assignment
deed is not seen stamped as per the Kerala Stamp Act,
1959. Ext.P2 assignment deed has been executed at
Ernakulam. The stamp duty payable for assignment of debt
is as conveyance mentioned in Article 22 of schedule of the
Act. Therefore stamp duty payable on assignment of debt is
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
:9:
8%. Section 34 of the Kerala Stamp Act provides that
insufficiently stamped instruments cannot be used for any
purpose unless the stamp duty and penalty is paid.
15. The answer of the Asset Reconstruction Company
to the afore ground is that there is no provision under the
Kerala Stamp Act, 1959 pertaining to assignment of debts.
What is transferred under Ext.P1 is only the debt along with
right to enforce the underline securities under law. Section
25 of the Kerala Stamp Act will come into operation only
when property is transferred in consideration for debt due to
the seller.
16. Section 25 of the Kerala Stamp Act, 1959 provides
that where any property is transferred to any person in
consideration, wholly or in part, of any debt due to him or
subject either certainly or contingently to the payment or
transfer of any money or stock, whether being or constituting
a charge or encumbrance upon the property or not such
debt, money or stock is to be deemed the whole or part, as
the case may be of the consideration in respect whereof the
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 10 :
transfer is chargeable with ad valorem duty.
17. Article 22 in the Schedule to the Kerala Stamp Act
deals with conveyance as defined in Section 2(d) not being a
transfer charged or exempted under No.55 immovable
property. The Article provides for the rates of stamp duty
payable.
18. Section 2(d) of the Kerala Stamp Act, 1959
defines the term “conveyance” as follows:-
“Conveyance” includes,-
(i) a conveyance on sale;
(ii) deed of amalgamation of two or more
companies whether in pursuance of an order of the
National Company Law Tribunal or not;
(iii) deed of amalgamation in pursuance of
the order under Section 44A of Banking Regulation
Act, 1949; and
(iv) every other instrument, by which
property, whether movable or immovable or any
interest in any property is transferred inter vivos
and which is not otherwise specifically provided in
the Schedule.
Every document by which movable property is transferred is
“conveyance”.
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 11 :
19. The question arising is whether the transfer of
loan account by a Bank / financial institution to an Asset
Reconstruction Company would amount to “conveyance”.
The Reserve Bank of India has issued Master Directions
called the Reserve Bank of India (Transfer of Loan
Exposures) Directions, 2021. Direction No.9(k) defines
transfer in the context of transfer of loan exposures to mean
as a transfer of economic interest in loan exposures by the
transferor to the transferee, with or without the transfer of the
underline loan contract, in the manner permitted.
20. Direction No.11 gives a general condition
applicable for all loan transfers and provides that loan
transfers should result in transfer of economic interest
without being accompanied by any change in underlining
terms and conditions of the loan contract usually. Direction
12 makes it clear that in loan participation transactions, by
design, the legal ownership completely remains with the
transferor even after economic interest has been transferred
to the transferee. Proviso to Direction 5 mandates that in
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 12 :
cases of loan transfers other than loan participation, legal
ownership of the loan shall be mandatorily transferred to the
transferee to the extent of economic interest transferred only.
21. It is therefore evident that what is transferred by a
Bank / financial institution to an Asset Reconstruction
Company is only a transfer of economic interest and there is
no conveyance of property or proprietary rights. The transfer
of legal ownership of the loan is limited to the extent to the
economic interest transferred.
22. Article 22 of the Kerala Stamp Act, 1959 takes
within its ambit only those conveyances as defined in Section
2(d). Even assuming that transfer of loan interest by a
financial institution involves transfer of any interest in the
secured asset and therefore it amounts to conveyance, even
then such conveyance will not fall in any of the categories
mentioned in Article 22.
23. The respondents have not brought to the notice of
this Court any other Article in the Schedule to the Kerala
Stamp Act prescribing stamp duty for loan transfers by
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 13 :
financial institutions to the Asset Reconstruction Companies.
Therefore, the arguments of the petitioner based on deficit
stamp duty is only to be rejected.
24. The petitioner relied on Ext.P5 order of the
National Company Law Tribunal in CP(IBC)/51/KOB/2022
wherein the Tribunal has held that insufficiently stamped
instrument cannot be used for any purpose. The said finding
of the Tribunal is doubtful. The NCLT has taken a contrary
view in CP(IBC)/08/KOB/2023 wherein the Tribunal has held
that the assignment deed in favour of the Asset
Reconstruction Company is not a conveyance relating to
immovable property.
25. Article 22 of the Kerala Stamp Act would apply
only when there is a sale of immovable property. In the case
of the respondent-Asset Reconstruction Company, the Bank
has not conveyed any property. What is transferred is only
the debt and right to recover the debt. Therefore, the
contention of the petitioner that the conveyance itself is
invalid, is unacceptable.
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 14 :
26. The Kerala Stamp Act, 1959 is a fiscal measure
enacted to secure revenue for the State on certain classes of
instruments. It is not enacted to arm a litigant with a weapon
of technicality to meet the case of his opponent. The
stringent provisions of the Stamp Act are concealed in the
interest of the revenue. Proceedings under the Securitisation
Act are proceedings to enforce security interest, without
intervention of the court. It is to be further noted that the
registration of the agreement in question is pending
consideration before the competent Sub Registrar's Office.
In such circumstances, the petitioner cannot be permitted to
take the defence of insufficient stamp duty to escape from his
liability.
27. The further ground urged by the petitioner is that
under Section 3 of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act,
2002, an Asset Reconstruction Company should be a Trust.
The respondent has asserted that the respondent-Company
is a Trust and necessary documents can be produced to
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 15 :
establish that the respondent will satisfy the requirements of
Section 3 of the Securitisation Act. I find no reason to
disbelieve the statement made by the respondent.
In the afore facts of the case, I do not find any
reason to interfere with the proceedings initiated by the
respondent. The writ petition and the OP(DRT) are therefore
dismissed.
Sd/-
N. NAGARESH, JUDGE
aks/09.01.2024
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 16 :
APPENDIX OF WP(C) 33707/2023
PETITIONER'S EXHIBITS
Exhibit P1 COPY OF SEC.13(2) NOTICE ISSUED BY THE
RESPONDENT, DATED 24/2/201
Exhibit P2 COPY OF ASSIGNMENT AGREEMENT DATED
17.3.2017
Exhibit P3 COPY OF ORDER OF CJM. THRISSUR DATED
13.6.23
Exhibit P4 COPY OF ORDER IN CMP 7575/2023 IN MC
441/2023 DATED 12.09.2023
Exhibit P5 COPY OF ORDER IN CP(IBC)/51/KOB/2022,
NATIONAL COMPANY LAW TRIBUNAL KOCHI
BENCH DATED 15.2.2023
RESPONDENT'S EXHIBITS
Exhibit R1(a) True copy of the Assignment Agreement
dated 17/03/2017 executed by South
Indian Bank Ltd in favour of the
Petitioner
Exhibit R1(b) True copy of the order dated
13/10/2023 in CP(IBC)/08/KOB/2023 of
the National Company Law Tribunal,
Kochi
Exhibit R1(c) True copy of the judgment dated
12/07/2018 in O.P(DRT) No.50 of 2018
of High Court of Kerala
Exhibit R1(e) True copy of the Order dated
13/10/2022 in I.A No.2176 of 2022 in
SA No.66 of 2018 of the Debts Recovery
Tribunal -1, Ernakulam
Exhibit R1(f) True copy of the judgment dated
02/11/2022 in O.P(DRT) No.407 of 2022
of High Court of Kerala
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 17 :
Exhibit R1(g) True copy of the Order dated
24.08.2023 in I.A No.2614 of 2023 in
SA No.66 of 2018 of the Debts Recovery
Tribunal -1, Ernakulam
Exhibit R1(d) True copy of the Order dated
17/08/2018 in SLP No.20249/2018 of the
Hon'ble Supreme Court
2024:KER:4166
W.P.(C).33707/2023 & OP(DRT).453/2023
: 18 :
APPENDIX OF OP (DRT) 453/2023
PETITIONER'S EXHIBITS
Exhibit P1 THE TRUE COPY OF THE SECTION 13(2)
NOTICE DATED 24.02.2016
Exhibit P2 THE TRUE COPY OF THE NOTICE OF
DISPOSSESSION DATED 26/7/2023
Exhibit P3 THE TRUE COPY OF ORDER IN IA.
2614/2023 IN SA NO.66/2018 DATED
24.8.2023
Exhibit P4 TRUE COPY OF SA. 66/2018
Exhibit P5 TRUE COPY OF IA. 2614/2023
Exhibit P6 TRUE COPY OF ORDER IN OP(DRT).407/2022
RESPONDENT'S EXHIBITS
Exhibit R1(a) True copy of the judgment dated
12/07/2018 in O.P(DRT) No.50 of 2018
of High Court of Kerala
Exhibit R1(b) True copy of the Order dated
17/08/2018 in SLP No.20249/2018 of the
Hon'ble Supreme Court
Exhibit R1(c) True copy of the Order dated
13/10/2022 in I.A No.2176 of 2022 in
SA No.66 of 2018 of the Debts Recovery
Tribunal -1, Ernakulam
Exhibit R1(d) True copy of the judgment dated
02/11/2022 in O.P(DRT) No.407 of 2022
of High Court of Kerala
Exhibit R1(e) True copy of the order dated
13/10/2023 in CP(IBC)/08/KOB/2023 of
the National Company Law Tribunal,
Kochi
