The “appeal” under Section 17 is available to the borrower against any measure taken under Section 13(4). Taking possession of the secured asset is only one of the measures that can be taken by the secured creditors. Depending upon the nature of the secured asset and the terms and conditions of the security agreement, measures other than taking the possession of the secured asset are possible under Section 13(4). Alienating the asset either by lease or sale, etc., and appointing a person to manage the secured asset are some of those possible measures. On the other hand, Section 14 authorises the Magistrate only to take possession of the property and forward the asset alongwith the connected documents to the borrower. Therefore, the borrower is always entitled to prefer an “appeal” under Section 17 after the possession of the secured asset is handed over to the secured creditor. Section 13(4)(a) declares that the secured creditor may take possession of the secured assets. It does not specify whether such a possession is to be obtained directly by the secured creditor or by resorting to the procedure under Section 14. By whatever manner the secured creditor obtains possession either through the process contemplated under Section 14 or without resorting to such a process, obtaining of the possession of a secured asset is always a measure against which a remedy under Section 17 is available. Dheerendra Kumar v. Authorised Officer, 2018 (129) ALR 32.
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Proviso to Section 138 is all important and stipulates three distinct conditions precedent, which must be satisfied before the dishonor of a cheque can constitute and offence and become punishable. The first condition is that the cheque ought to have been presented to the Bank within a period of six months from the date on which it is drawn or within the period of its validity, whichever is earlier. The second condition is that the payee or the holder in due course of the cheque, as the case may be, ought to make a demand for the payment of the said amount of money by giving a notice in writing, to the drawer of the cheque, within thirty days of the receipt of information by him from the bank regarding the return of the cheque as unpaid. The third condition is that the drawer of such a cheque should have failed to make payment of the said amount of money to the payee or as the case may be, to the holder in due course of the cheque within fifteen days of the receipt of the said notice. It is only upon the satisfaction of all the three conditions mentioned above and enumerated under the proviso to Section 138 as clauses (a), (b) and (c) thereof that an offence under Section 138 can be said to have been committed by the person issuing the cheque. Virendra Kumar Gupta v. State of U.P., 2016 (96) ACC 729.
A bare perusal of Section 138 of Negotiable Instruments Act shows that to constitute an offence thereunder, following ingredients must be satisfied:
(a) A person must have drawn a cheque on an account maintained by him in a bank.
(b) It must be for payment of certain amount of money to any person out of his account.
(c) The cheque should have been drawn for discharge of any debt or any liability in whole or in part.
(d) The cheque has been presented to Bank within a period of six months from the date on which it was drawn or within a period of it’s validity, whichever is earlier.
(e) The cheque is returned by the bank unpaid, either because of the amount of money standing to the credit of that account is insufficient to honour the cheque or that it exceeds the amount arranged to be paid from that account by an agreement with the bank.
(f) The payee or the holder in due course makes a demand for payment of said amount of money which remained unpaid due to return of cheque by the bank by giving a notice in writing to the drawer
(g) The notive must have been given within thrity days of the receipt of the information from the bank regarding return of the cheque as unpaid.
(h) The drawer of such cheque fails to make payment of aforesaid money to the payee or the holder within 15 days of the receipt of the said notice. Mahipal Singh v. State of U.P., 2014 (84) ACC 462.
In a recent Judgment of the Allahabad High Court in C.M.W.P. No. 71057 of 2011 decided on 09.02.2012, reported in 2012 (3) A.W.C. 2821 it was held as under:
“The bank or financial institution cannot be permitted to take a decision on their own that there has been a default and proceed to take possession of the hypothecated vehicle without giving an opportunity to the borrower to present his case. In this manner, the banks would be judging their own cause with the right of execution, as they themselves would unilaterally determine that there has been a default and proceed to execute their own decision by taking possession of the hypothecated vehicle through their own appointed agencies, which may be muscle men. Adopting such a recourse would clearly be a blatant violation of the mandate of Hon’ble Supreme Court.
In case of default in repayment of its loan, it is always open for the Banks to get the agreement with its borrower enforced through the process of law. Even the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 which gives special power to the bank for realization of its dues also provides for certain safeguards. Section 13(2) of the act of 2002 has been interpreted by the Apex Court in the case of Mardia Chemicals Ltd. V. Union of India, (2004) 4 SCC 311 : AIR 2004 SC 2371 that the borrower has a right to submit his reply to the said notice. Pursuant to the decision of the Apex Court, sub-section (3-A) of Section 13 has been inserted making it obligatory on the financial institutions (including banks) to pass an order after considering the reply submitted by the borrower. It is only thereafter that proceedings for taking over possession can be initiated under Section 13(4) of the Act of 2002.”