Indiabulls Housing Finance Limited v. M/S. Deccan Chronicle Holdings Limited and Others

A. K. SIKRI, J. 1. This appeal preferred by Indiabulls Housing Finance Limited, in which the main contesting parties are M/s. Deccan Chronicle Holdings Limited and its Directors (other respondents are the proforma parties), questions the correctness and legality of the judgment and order dated February 04, 2014 passed by the High Court of Judicature of Andhra Pradesh at Hyderabad. The impugned judgment is passed by the High Court in the writ petition which was filed by t he contesting respondents questioning the validity of actions taken by t he appellant against the contesting respondents under the provis ions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the ‘SARFAESI Act’) for recovery of the loan amounts, along with inter est, which are payable by the contesting respondents to the appellant. 2. The High Court has accepted the challenge laid b y the contesting respondents holding that: (a) loan agreements contained arbitration clauses which wer e invoked by the appellant with the filing of cases under Section 9 of the Arbitration and Conciliation Act, 1996. In view thereof, initiation of any other proceedings under the SARFAESI Act are impermissible in law; and (b) the loan was initially given by M/s. Indiabulls Financial Services Limited (for short, ‘IBFSL’) on December 08, 2011 and January 05, 2012 in the sum of Rs.50 crores each. IBFSL was not a banking company or financial institution within the meaning of Section 2(d) and (m) of the SARFAESI Act and, therefore, it had no jurisdiction to take any steps by invoking the provisions of this Act. However, IBFSL got merged with the appellant company. No doubt, the appellant is a financial 1101 institution under the SARFAESI Act. However, since IBFSL had no right to initiate any action under the said Act, as a successor-in-interest, the appellant steps into the shoes of IBFSL and, therefore, it also cannot initiate any action under the SARFAESI Act. If that is allowed, held the High Court, substantive rights of the contesting respondents which accrued to them under Sections 69 and 69A of the Transfer of Property Act, 1882 would be adversely affected, which cannot be countenanced. 3. Having given the glimpse of the transaction which was entered into between the parties and also that of the basis of t he impugned judgment of the High Court, we proceed to discuss the details on which the lis is founded. 4. We may start with the narration of brief facts of the c ase, which are as follows: On April 18, 2005, IBFSL was granted a certificate under Section 45-I(a) of the Reserve Bank of India Act, 1934 to operate as a Non- Banking Financial Company and, thus, act as a financial institution under the said Act. The appellant was incorporated on May 10, 2005. The appellant and IBFSL were sister concerns. The appellant was grant ed a registration certificate dated December 28, 2005 to comm ence the business of housing finance institution. The Central Government, vide Notification dated September 19, 2007, issued under Section 2(1)(m) of SARFAESI Act, specified the petitioner as a ‘financial institution’ for the purposes of the said Act. IBFSL disbursed a loan amount of Rs.50 crores to the respondent borrowers vide Loan Agreem ent dated December 08, 2011. The loan facility was secured by the r espondent borrowers by creating equitable mortgage over various properties. IBFSL also disbursed a further amount of Rs.50 crores to th e respondent borrowers vide Loan Agreement dated January 05, 2012. The loan facility was security by the respondent borrowers again by creating equitable mortgage over various properties. 5. Sometime in the year 2012, it was proposed that IBFSL ge ts merged with the appellant. After completing the formalities of informing the National Housing Bank as well as the Reserve Bank of India about the aforesaid proposal and furnishing them copies of the s cheme of merger, the appellant filed a petition under sections 391-394 of the Indian INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A. K. SIKRI, J.] Companies Act, 1956 in the High Court of Delhi for merger of IBFSL with the appellant. The High Court, after taking various steps under the provisions of the Companies Act, ultimately sanctioned the scheme of arrangement between IBFSL and the appellant vide ord ers dated December 12, 2012. With the sanction of the aforesaid merger, the assets and liabilities of IBFSL stood vested in the appellant, with IBFSL being dissolved without winding up on its amalgamation with the appe llant. Pursuant to the said merger, the borrowers of IBFSL, includin g the respondent borrowers, became the borrowers of the appellant. 6. Insofar as respondent borrowers are concerned, th ey had committed default in repaying the loans advanced to them b y IBFSL and, therefore, even before the merger, IBFSL had issued loan r ecall notice dated September 18, 2012 to the respondent borrowers. On March 04, 2013, the loan accounts of the contesting respondents and other co- borrowers were classified as Non Performing Assets (NPA) by IBFSL. On March 06, 2013, IBFSL filed a petition under Section 9 of the Arbitration Act, being O.P. No. 377 and 378 of 2013, before III Addl. Chief Judge, City Civil Court, Hyderabad for securing the amount payable by the respondent borrowers. An ad-interim injunction restraining the respondent borrowers and other co-borrowers therein from alienati ng the scheduled properties to third parties in any manner was passed. The scheme of arrangement as approved by the order dated April 12, 2013 was filed with the Registrar of Companies on March 08, 2013 making the same effective. The appellant, having stepped into the shoes of IBFSL in respect of the debts owed to IBFSL, issued notice dated March 08, 2013 under Section 13(2) of SARFAESI Act to the responden t borrowers and other co-borrowers. This was followed by notice dated May 29, 2013 issued under Section 13(4) of SARFAESI Act in respect of taking over symbolic possession of the mortgaged properties. 7. The respondents herein, on July 17, 2013, filed SA No. 182 of 2013 before the Debts Recovery Tribunal, Chandigarh under Section 17 of SARFAESI Act challenging the action of the appellant invoking the measures under Section 13(4) of SARFAESI Act. Within few days thereafter, i.e. on July 30, 2013, respondent No.1 also field Writ Petition No. 22688 of 2013 challenging, inter alia , the declaration of the account as NPA and passing of orders by the Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act. Similar writ petitions, being 1103 Writ Petition Nos. 22689 and 22934 of 2013 were filed by respondent No.1’s employee union and respondent No.4 respectively. On September 04, 2013, the respondents herein unconditionally withdrew SA No. 182 of 2013 filed before the Debts Recovery Tribunal, Chandigarh. The appellant issued an auction notice dated November 21, 2013 informing the respondent borrowers that auction of the Banjara Hill properties of the respondent borrowers would be conducted on December 24, 2013. At this juncture, on December 19, 2013, respondent Nos.1 to 5 filed Writ Petition No. 37381 of 2012 before the High Court. 8. In the aforesaid writ petition, the High Court passed i nterim orders dated December 20, 2013, directing the parties to maintain status quo . Another interim order dated December 23, 2013 was passed directing the appellant not to finalise the auction though it was permitted to receive bids. However, the said auction could not fructify as, according to the appellant, some miscreants belonging to the contesting respondents came on the spot and threatened the intending purchasers and e ven tried to beat the representatives of the respondents and, ther efore, the auction had to be cancelled. The appellant thereafter issued another auction notice dated December 28, 2013 fixing the auction dates as 3 rd and 4 th February 2014 in respect of Banjara Hills and Raj Bhavan Road properties respectively. Auction in respect of Banjara Hills properties took place on February 03, 2014 as per the date fixed. Howev er, the sale was not finalised on account f the interim orders passed by the High Court. On February 04, 2014, when the next property was to be auctioned, the High Court gave the judgment in Writ Petition No. 37381 of 2013 filed by the contesting respondents allowing the said writ peti tion and setting aside the entire invocation of the SARFAESI Act by the appellant. 9. As already pointed out above, the High Court is swayed by the fact that after IBFSL had invoked the provisions of Sect ion 9 of the Arbitration Act and filed petitions in this behalf, having r egard to the arbitration agreement between the parties, it was not open to the appellant to take recourse to the provisions of SARFAESI Act. This aspect is concluded in the following manner: “The two O.Ps. i.e. 377 and 378 of 2013 have already been filed in the name of IBFSL, under Section 9 of the Arbitration Ac t. The arbitration clause that existed in the agreements has been extracted in the preceding paragraphs. Section 8 of the Arbitration INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] Act makes it amply clear that if the agreement between the parties contains an arbitration clause, institution of other proceedings is prohibited. When a suit cannot be instituted by a party t o an agreement, which contains an arbitration clause, the initiation of proceedings before other fora becomes equally untenable. The proceedings under the SARFAESI Act cannot be placed on a higher pedestal. The borrower of a secured financial institution, as defined under Section 2(f) of the SARFAESI Act cannot be treated as a super Court, to be kept on a higher pedest al in the context of Section 8 of the Arbitration Act. When arbitration proceedings have already been initiated, the 4 th respondent cannot be permitted, ignore them and proceed against the security.” 10. The High Court noted that the contesting respondents had not borrowed any amount from the appellant. The loan was taken f rom IBFSL, which was not under the purview of SARFAESI Act. Therefore, at the time of taking the loan, the respondent borrowers knew that IBFSL would not be in a position to take recourse to the SARFAESI Act. With the merger of IBFSL with the appellant, ruled the High Court, the loan transaction which was outside the purview of the SARFAESI Act, could not be brought under its purview without the consent of the borrower. According to the High Court, SARFAESI Act prescribes a new legal regime and if the loan is allowed to be brought within the SA RFAESI Act only because of merger and the appellant is allowed to take recourse under the SARFAESI Act, it would affect substantive ri ghts of the contesting borrowers under Sections 69 and 69A of the Transfe r of Property Act. In the process, the High Court has noted tha t the views of the Uttarakhand High Court and the Allahabad High Court are contrary to the aforesaid view. However, it chose to agree with the vi ew taken by the Division Bench of the Orissa High Court in deciding that provisions of SARFAESI Act will not be applicable. Pertinently, Full Bench of the Orissa High Court itself has overruled its Division Bench judgment. 11. We may record at this stage that the main ground on whi ch notice issued under SARFAESI Act had been quashed i s the impermissibility of invoking the provisions of the Act by the appellant herein who took over the assets and liabilities of IBFS L on merger. Insofar as the other issue, namely, provisions of SARFAESI Act could not be invoked as IBFSL had already invoked the machinery under the Arbitration Act by filing petitions under Section 9 thereof is concerned, 1105 this is decided as the subsidiary issue. Insofar as this subsidiary question is concerned, learned counsel for the respondent did not press this ground seriously and it was virtually conceded that merely because IBFSL had filed applications under Section 9 of the Arbitration Act, would not create a bar for proceeding under the SARFAESI Act. Even otherwis e, we find that the High Court was in error in deciding this issue . It is not correct to say that proceedings under the SARFAESI Act can not be placed on high pedestal. We find that SARFAESI Act is a special enactment which was enacted by the Parliament to pro vide speedy remedy to the banks and financial institutions without rec ourse to the court of law. On the other hand, the Arbitration and Conciliation Act, in contrast, is a statute of general nature. Merely because steps are taken under this general law would not mean that remedy under the sp ecial statute is foreclosed. If at all, legal position is just the reverse. Matter is no more res integra and is covered by a judgment of this Court in Transcore v. Union of India & Anr.1 In that case, after analysing the provisions of the Recovery of Debts Due to Banks an d Financial Institutions Act, 1993, the Court summed up the position as under: “18. On analysing the above provisions of the DRT Act, we find that the said Act is a complete code by itself as far as recovery of debt is concerned. It provides for various modes of recovery. I t incorporates even the provisions of the Second and Third Schedules to the Income Tax Act, 1961. Therefore, the debt due under the recovery certificate can be recovered in various ways. The remedies mentioned therein are complementary to each other. The DRT Act provides for adjudication. It provides for adjudication of disputes as far as the debt due is concerned. It covers secured as well as unsecured debts. However, it does not ru le out applicability of the provisions of the TP Act, in particular Sections 69 and 69-A of that Act. Further, in cases where the debt is secured by pledge of shares or immovable properties, with the passage of time and delay in the DRT proceedings, the value of the pledged assets or mortgaged properties invariably falls. On acc ount of inflation, value of the assets in the hands of the bank/FI invariably depletes which, in turn, leads to asset-liability mismatch. T hese contingencies are not taken care of by the DRT Act and, therefore, Parliament had to enact the NPA Act, 2002.” 1(2008) 1 SCC 125 INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] 12. Thereafter, the Court analysed the provisions of SARFAESI Act and then noted, in paragraph 37 of the judgment, three points of determination which arose for consideration. We are concerned with point No.1 formulated therein, which reads as under: “(i) Whether the banks or financial institutions having elected to seek their remedy in terms of the DRT Act, 1993 can still invoke the NPA Act, 2002 for realising the secured assets without withdrawing or abandoning the OA filed before DRT under the DRT Act.” 13. After detailed discussion on this question, the Court rejected the applicability of the doctrine of election by holding that simply because remedy under the provisions of the DRT Act was availed would not mean that the financial institution was precluded from taking steps under SARFAESI Act. Thus, answering the question in the affirmative, essence of the discussion can be captured in the following paragraphs: “64. 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. Accordi ng to American Jurisprudence , 2d, Vol. 25, p. 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 addit ional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell’s Principles of Equity (31st Edn., p. 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 th e two remedies, therefore, the doctrine of election has no application. 65. In our view, the judgments of the High Courts which have taken the view that the doctrine of election is appl icable are erroneous and liable to be set aside. 66. We have already analysed the scheme of both the Ac ts. Basically, the NPA Act is enacted to enforce the inter est in the 1107 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 13 of the N PA Act is recovery by non-adjudicatory process. A secured as set under the 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 level is the other obligation of the debtor. It is t his other obligation which invites applicability of the NPA Act. It is for this reason, that Sections 13(1) and 13(2) of the NPA Act proceed 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-performing. For the above reasons, the N PA Act states that the enforcement could take place by non- adjudicatory process and that the said Act removes all fe tters under the above circumstances on the rights of the s ecured creditor.” 14. With this, we now address the central issue on which detailed arguments were advanced by both the parties. We may note t hat our discussion is not on a virgin field as the terrain has already been covered by this Court in M.D. Frozen Foods Exports Pvt. Ltd. & Ors. v. Hero Fincorp Ltd.2 The learned senior counsel appearing for the appellant had submitted that this case, which is directly on point, not only lays down the proposition that even successor-in-interest (like the appellant herein) would be authorised to invoke the provisions of SARFAESI Act even if the original lender was not a financial institution covered by the Act, it has specifically overruled the judgment of the Andhr a Pradesh High Court, which is the subject matter of appeal at hand. On that basis, it was submitted that it was not even necessary to have further probe in the matter. 2(2017) SCC Online SC 1211 INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] 15. Learned counsel for the appellant is factually correct in pointing out that the impugned judgment of the Andhra Pradesh High Court is specifically noted and overruled by this Court in M.D. Frozen Foods. Therefore, it would be apt to discuss the said judgment in the first instance. 16. In M.D. Frozen Foods the appellants had borrowed monies for their business from the respondents against security of im movable properties by creating an equitable mortgage. Loan agreement contained an arbitration clause. Since the appellant defaulted in making the payment and the account became NPA, the respondent invoked the arbitration clause on November 16, 2016. However, three months before this invocation, a notification was issued on August 05, 2016 specifying certain Non-Financial Banking Companies (NFBCs) covered under clause (f) of Section 45-I of the RBI Act, with assets of more than Rs. 500 crores and above, as financial institutions and directing that the provisions of SARFAESI Act shall apply to such financial instituti ons with the exceptions of provisions of Sections 13 to 19 of that Act. Sections 13 to 19 were made applicable, as per the notification, only to such securit y interest which is obtained for securing repayment of secured debt with principal amount of Rs.1 crore and above. The resp ondent was specifically covered by the said notification which was issued in exercise of powers conferred under sub-clause (iv) of clause (m) of sub-section (1) of Section 2 read with Section 31A of the SARFAESI Act. In view of the aforesaid notification, the respondent issued a notice under Section 13(2) of SARFAESI Act on November 24, 2016 for one of the seven properties mortgaged to it against the aforesaid loan which was advanced to the appellants. 17. Having regard to the aforesaid facts in M.D. Frozen Foods, the Court formulated following three questions which had arisen f or consideration: “A. Whether the arbitration proceedings initiated by the respondent can be carried on along with the SARFAESI proceedin gs simultaneously? B. Whether resort can be had to Section 13 of the SARFAESI Act in respect of debts which have arisen out of a loan agreement/ mortgage created prior to the application of the SARFAESI Act to the respondent? 1109 C. A linked question to question (ii), whether the lender can invoke the SARFAESI Act provision where its notification as financial institution under Section 2(1)(m) has been issued after the account became an NPA under Section 2(1)(o) of the said Act?” These questions amply demonstrate that the instant case is virtually on the same footing. 18. Insofar as question ‘A’ is concerned, the Court categorically held that merely because remedy under the Arbitration Act was invoked was no ground to debar the respondent from taking recourse to t he SARFAESI Act. The discussion from that judgment is reproduced below: “26. A claim by a bank or a financial institution, before the specified laws came into force, would ordinarily have been filed in the Civil Court having the pecuniary jurisdiction. The setting up of the Debt Recovery Tribunal under the RDDB Act resulted in this specialised Tribunal entertaining such claims by the banks and finan cial institutions. In fact, suits from the civil jurisdiction were transferred to the Debt Recovery Tribunal. The Tribunal was, th us, an alternative to a Civil Court recovery proceedings. 27. On the SARFAESI Act being brought into force seeking to recover debts against security interest, a question was rai sed whether parallel proceedings could go on under the RDDB Ac t and the SARFAESI Act. This issue was clearly answered in favour of such simultaneous proceedings in Transcore v. Union of India . A later judgment in Mathew Varghese v. M. Amritha Kumar also discussed this issue in the following terms: “45. A close reading of Section 37 shows that the provisions of the SARFAESI Act or the Rules framed thereunder will be in addition to the provisions of the RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading Sections 35 and 37 together, it will have to be held that in the event of any of the provisions of the RDDB Act not being inconsistent with the provisions of the SARFAESI Ac t, the application of both the Acts, namely, the SARFAESI Act and the RDDB Act, would be complementary to each other. In this context, INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] reliance can be placed upon the decision in Transcore v. Union of India [(2008) 1 SCC 125 : (2008) 1 SCC (Civ) 116]. In para 64 it is stated as under after referring to Section 37 of the SARFAESI Act: (SCC p. 162) “64. … According to American Jurisprudence, 2d, Vol. 25, p. 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 Principles of Equity (31 st Edn., p. 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.” (emphasis added) 46. A reading of Section 37 discloses that the application of th e SARFAESI Act will be in addition to and not in derogation of the provisions of the RDDB Act. In other words, it will not in any way nullify or annul or impair the effect of the provisions of the RDDB Act. We are also fortified by our above statement of law as the heading of the said section also makes the position cle ar that application of other laws are not barred. The effect of Section 37 would, therefore, be that in addition to the provisions contained under the SARFAESI Act, in respect of proceedings initiated under the said Act, it will be in order for a party to fall b ack upon the provisions of the other Acts mentioned in Section 37, namely, the Companies Act, 1956, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, or any other law for the time being in force.” 28. These observations, thus, leave no manner of doubt and the issue is no more res integra , especially keeping in mind the provisions of Sections 35 and 37 of the SARFAESI Act, which read as under: “35. The provisions of this Act to override other laws. - The provisions of this Act shall have effect, notwithstanding 1111 anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law.” … .… .… .…. “37. Application of other laws not barred. - The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force.” 29. The aforesaid two Acts are, thus, complimentary to each other and it is not a case of election of remedy. xx xx xx 33. SARFAESI proceedings are in the nature of enforcement proceedings, while arbitration is an adjudicatory process. In the event that the secured assets are insufficient to satisfy the debts, the secured creditor can proceed against other assets in execution against the debtor, after determination of the pending outstanding amount by a competent forum. 34. We are, thus, unequivocally of the view that the judgments of the Full Bench of the Orissa High Court in Sarthak Builders Pvt. Ltd. v. Orissa Rural Development Corporation Limited , the Full Bench of the Delhi High Court in HDFC Bank Limited v. Satpal Singh Bakshi (supra) and the Division Bench of the Allahabad High Court in Pradeep Kumar Gupta v. State of U.P. lay down the correct proposition of law and the view express ed by the Andhra Pradesh High Court in Deccan Chronicles Holdings Limited v. Union of India following the overruled decision of the Orissa High Court in Subash Chandra Panda v. State of Orissa does not set forth the correct position in law. SARFAESI proceedings and arbitration proceedings, thus, can go hand in hand.” 19. Insofar as questions ‘B’ and ‘C’ are concerned, the Court again referred to the conflicting opinion of different Hi gh Courts and INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] after discussion held that the SARFAESI Act was retroactive in nature and, therefore, once this Act came into force, the respondent in the said case had right to invoke the provisions of the Act even if loan agreement was entered into and mortgage created prior to the coming into force the SARFAESI Act. Paragraphs 36 to 38 of the judgment need to be reproduced in this behalf, which are to the following effect: “36. The SARFAESI Act was brought into force to solve the problem of recovery of large debts in NPAs. Thus, the very rationale for the said Act to be brought into force was to provide an expeditious procedure where there was a security intere st. It certainly did not apply retrospectively from the date when it came into force. The question is whether, the Act being applicable to the respondent at a subsequent date and thereby allowing the respondent to utilize its provisions with regards to a past debt, would make any difference to this principle. We are of the view that the answer to the same is in the negative. 37. The Act applies to all the claims which would be alive at the time when it was brought into force. Thus, qua the respondent or other NBFCs, it would be applicable similarly from the date when it was so made applicable to them. 38. The Full Bench of the Orissa High Court in Sarthak Builders Pvt. Ltd. v. Orissa Rural Development Corporation Limited (supra) has, in fact, succinctly sets out this aspect. No doubt, till the respondent was not a ‘financial institution’ within the meaning of Section 2(1)(m)(iv) of the SARFAESI Act, it was not a ‘secured creditor’ as defined under Section 2(1)(zd) of the SARFAESI Act and, thus, could not invoke the provisions of the SARFAESI Act. However, the right to proceed under the SARFAESI Act accrued once the Notification was issued. The Full Bench referred to a Division Bench judgment of the Uttarakhand High Court in Unique Engineering Works v. Union of India which dealt with the issue of retrospectivity and retroactivity. In case of retroactivity, the Parliament takes note of the existing conditions and promulgates the remedial measures to rectify those conditions. In fact the SARFAESI Act, in our view, was to remedy such a position and provide a measure against secured interests. The scheme of the SARFAESI Act, is really to provide a procedural remedy against security interest already created. Therefore, an existing borrower, 1113 who had been granted financial assistance was covered under Section 2(f) of the said Act as a ‘borrower’. Not o nly this expression, the definition clauses dealing with ‘debt securities’, ‘financial assistance’, ‘financial assets’, etc., clearly convey t he legislative intent that the SARFAESI Act applies to al l existing agreements irrespective of the fact whether the lender wa s a notified ‘financial institution’ on the date of the execution of the agreement with the borrower or not. The scheme of t he SARFAESI Act sets out an expeditious, procedural methodology, enabling the bank to take possession of the property for non- payment of dues, without intervention of the court. The mere fact that a more expeditious remedy is provided under the SARFAESI Act does not mean that it is substantive in character or has created an altogether new right. To accept the argument of the appellants would imply that they have an inherent right to del ay the enforcement against the security interest!” 20. The Court also referred to certain judgments laying down distinction between retroactive and retrospective operation of a particular statute 3.. 21. The fact situation was, thus, almost the same in the insta nt case. The only difference is that here the loan was initially sanctioned by IBFSL which stands merged with the appellant and the appellant is the successor-in-interest which is covered by the SARFAESI Act. In the aforesaid case, though the entity which disbursed the loan remained the same, however, at the time when the loan was given by the respondent to the appellant it was not a financial institution cover ed under the SARFAESI Act, which status was attained by the respondent in view of notification dated August 05, 2016 issued much after the loa n was disbursed to the appellant therein. This does not make any difference in the outcome, as discussed in detailed hereinafter. 22. Learned counsel for respondents could not dispute that the aforesaid judgment covers the present case in its entirety. This position had to be accepted by them having regard to the fact that the judgment of the High Court which is impugned in these proceedings has been specifically overruled by this Court in M.D. Frozen Foodscase. Faced 3West v. Gwynne , 1911 2 Ch 1 at pp. 11, 12 Trimbak Damodhar Raipurkar v. Assaram Hiraman Patil , 1962 Supp (1) SCR 700 In re Athlumney. Ex parte Wilson , (1898) 2 Q.B. 547 INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] with this stark reality staring at the face of the respo ndents, a valiant effort was made to convince this Bench to take a contrary view and in the process it was submitted that in M.D. Frozen Foods some important legal aspects have not been considered. 23. To put it pithily, the submissions of the learned counsel for respondents revolved around the following aspects: (i) The appellant had neither advanced nor granted any lo an or financial assistance to respondent no. 1 and, therefore, it could not have invoked the provisions of the SARFAESI Act. (ii) Respondent no. 1 could not be treated as ‘borrower’ as def ined under Section 2(1)(f) of the SARFAESI Act read with Sections 2(1)(c) and 2(1)(m) of that Act. Submission was tha t the respondent no. 1 is not a person who has been granted financial assistance by any Bank or Financial Institution nor can respondent no. 1 be brought under the ambit of the definition of b eing a person who has given a guarantee or create any mortgage or pledge as security for the financial assistance granted by any Bank or Financial Institution, i.e., the appellant. It was argued that the definition of the term borrower is clear and un-ambiguous itself and the rule of literal interpretation deserves to be deployed. The respondents relied upon the dictum in P.K. Unni vs. Nirmala Industries & Others 4 wherein it is held that the Court must proceed on an assumption that the legislature did not mak e a mistake and that it intended to say what it said it was furth er held that even assuming that there was a defect or omissi on in the words used by the legislature, the Court would not go to its said to correct or make up the deficiency. The Court cannot add words to a statute or read words into it which are not there , especially when the literal reading produces an intelligible result. The courts are not authorised to alter a word so as to produce a “casus omissus”. Support from the judgment in the matter of Union of India v. Elphin Stone Spinning and Weaving Company Limited & Others 5 was also taken in this behalf. The learned counsel also referred to yet another case, viz., Delhi Financial Corporation and another v. Rajiv Anand and others6 wherein this aforesaid principle is reiterated. 4 (1990) 2 SCC 378 5 (2001) 4 SCC 139 6 (2004) 11 SCC 625 1115 (iii) The loan agreements dated December 08, 2011 and January 05, 2012 which were entered into between respondent No. 1 and IBFSL cannot be classified as ‘security arrangement’ within the meaning of Section 2(1)(zb) of the SARFAESI Act. (iv) These agreements did not create ‘security interest’ within the eaning of Section 2(1)(zb) of the SARFAESI Act. It was argued that the term security assets as defined under Section 2(1)(zc) of the Act means the property on which the security interest is created. The terms ‘security interest’ i s defined under Section 2(1)(zf) to mean right, title, interest of any kind whatsoever upon property created in favour of a secured creditor (as defined under Section 2(1)(zb) and includes a mortgage, charge, hypothecation or assignment other than specified in Section 31). Similarly security agreement is defined under Section 2(1)(zb). The submission was that the agreements dated December 08, 2011 and January 05, 2012 do not fall within the purview of Section 2(a)(zb) since at the time when the said agreements were entered into, the entity in favour of which they were executed, i.e., Indiabulls Financial Services Limited, was not a secured creditor within the meaning of Section 2(1)(zd) of the SARFAESI Act. Under the circumstances are the necessary ingredients of Section 13(1) and 13(2) being absent, no action could have been taken under Section 13(2) or Section 13(4) of the Act. It is this say of the respondents that the clauses contained in the scheme of amalgamation, firstly do not manifest any intention to create any new right in favour of the amalgamated company. Secondly, clauses in scheme of amalgamation, albeit sanctioned by Court, cannot be raised to the pedestal of statutory provisions creating a right in favour of subsequent acquirer of rights not statutorily provided, nor can such clauses be held to create a deeming fiction not statutorily provided. (v) Amalgamation of an entity not lying within the ambit o f SARFAESI Act then entity which falls within realm of the said Act would not entitle amalgamated entity to invoke the provisions of SARFAESI Act, in respect of a transaction/ INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] agreement entered into much prior to the amalgamation. The submission was that the imprimatur created by virtue of sanctioning of a scheme by High Court under Sections 391 to 394 of the Companies Act cannot be held to create rights, liabilities and obligations which were not statutorily envisaged. It was argued that the provisions of SARFAESI Act, cannot be held to be purely procedural, they create substantial right in favour of the secured creditor for recovery of its dues by way of enforcement of security interest without invocati on of the court. Section 13(1) creates substantive rights and by no stretch of imagination, and cannot be said to a provision, procedural in nature. The procedure for enforcement of that substantial right is provided under Sub-Section (2) on the happening of the eventuality as mentioned therein. That a further procedure of prescribing the details in a notice is to be given by virtue of Section 13(3) and provide for making a representation under Section 13(3)(A) and further provides for a procedure for release and recovery of secured debt under Section 13(4). In absence of a substantial right being created by Section 13(1), procedural provisions contained in sub-Sections (2) to (4) are meaningless as it would not provide a remedy for the enforcement of substantial right created under Section 13(4). It would not, therefore, be correct to treat SARFAESI Act as a merely procedural statute. 24. It was submitted that this was a reverse merger inasmuch as IBFSL was a holding company and the appellant company was onl y a subsidiary company and holding company was sought to be amalgamated and merged with the subsidiary company. 25. It was also submitted that the entire exercise of me rger was undertaken to transfer loan from financial company to a financial company in order to take advantage of provisions of SARFAESI Act, which according to the respondents is not permissible in law. O n the aforesaid basis, the first submission of the learned counsel for respondents was that there was no transfer and vesting of loan in the appellant company provisions as per the scheme. It was argued that the sc heme envisaged, under paragraph 4, that with effect from the appointed date, i.e., April 01, 2012, the amalgamating company comp rising the amalgamating undertaking shall, pursuant to the sanction of the scheme 1117 by the High Court and compliance of statutory provisions, be and stand transferred to and vested in the amalgamated company as a going concern without any further act, instrument, deed, matter or thing so as to become, as and from the appointed date April 01, 2012, the undertakings of the amalgamated company by virtue of and in the manner provided in the scheme. 26. Various other clauses of the scheme were referred to, to buttress the aforesaid submission. In this hue, it was argued that since as per Clause 8 of the Scheme, all suits, actions and other proceedings including legal and taxation proceedings etc. are to be conti nued or enforced by or against the amalgamating company. The proce edings instituted by IBFSL under Section 9 of the Arbitration Act against the respondents would be deemed to be an act of the appellant. In other words, the amalgamating company can have no better and further right that one possesses by IBFSL. 27. The learned counsel for the respondents attempt ed to strengthen the aforesaid architecture with the help of some legal precedents. In the first instance, reference was made to the judgment in the case of Rishabh Agro Industries Limited v. P.N.B. Service Limited 7 wherein this Court held as under: “6. Learned counsel appearing for the respondent has submitted that such an interpretation would defeat the ends of justice and make the petitions under the Companies Act, infructuous inasmuch as any unscrupulous litigant, after suffering an order of winding up, may approach the Board merely be filing a petition and consequently get the proceedings in the Company case stayed. Such a grievance may be justified and the submission having substance but in view of the language of Sections 15 and 16 of the Act particularly explanation to Section 16 inserted by Act No. 12 of 1994, this Court has no option but to adhere to its earlier decision taken in Real Value Appliances (Supra). W hile interpreting, this Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend modify or repeal it by having recourse to appropriate procedure, if deemed necessary.” 6 (2000) 5 SCC 515 INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] It was argued that the above observations of this Court clear ly negate the submission of the appellant that because the SARFAESI Act has been enacted to overcome the accumulated NPA in public interest, the term ‘borrower’ has to be widely construed. 28. Reliance was also placed on the Constitution Bench judgment in the case of Padma Sundara Rao v. State of Tamil Nadu 8 where this Court has held as under: “12. The rival pleas regarding rewriting of statute and casus omissus need careful consideration. It is well-settled principle in law that the court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the legislature itself. The question is not what may be suppose d and has been intended but what has been said. “Statutes should be construed, not as theorems of Euclid”, Judge Learned Hand said, “but words must be construed with some imagination of the purposes which lie behind them”. (See Lenigh Valley Coal Co. v. Yensavage [218 FR 547].) The view was reiterated in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama [(1990) 1 SCC 277 : AIR 1990 SC 981]. 13. In D.R. Venkatchalam v. Dy. Transport Commr. [(1977) 2 SCC 273 : AIR 1977 SC 842] it was observed that courts must avoid the danger of a priori determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation. 14. While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misuse d and subjected to the abuse of process of law, it is for the legislature to amend, modify or repeal it, if deemed necessary. (See Rishabh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [(2000) 5 SCC 515]) The legislative casus omissus cannot be supplie d by judicial interpretative process. Language of Section 6(1) is plain 8 (2002) 3 SCC 533 1119 and unambiguous. There is no scope for reading something into it, as was done in Narasimhaiah case [(1996) 3 SCC 88] . In Nanjudaiah case [(1996) 10 SCC 619] the period was further stretched to have the time period run from date of service of the High Court’s order. Such a view cannot be reconciled with the language of Section 6(1). If the view is accepted it would mean that a case can be covered by not only clause ( i) and/or clause (ii ) of the proviso to Section 6(1), but also by a non-prescribe d period. Same can never be the legislative intent. 15. Two principles of construction — one relating to casus omissus and the other in regard to reading the statute as a whole — appear to be well settled. Under the first principle a casus omissus cannot be supplied by the court except in the case of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or secti on must be construed together and every clause of a section sh ould be construed with reference to the context and other clauses thereof so that the construction to be put on a particular provision makes a consistent enactment of the whole statute. This would be more so if literal construction of a particular clause leads to manifestly absurd or anomalous results which could not have been intended by the legislature. “An intention to produce an unreasonable result”, said Danckwerts, L.J., in Artemiou v. Procopiou [(1966) 1 QB 878 : (1965) 3 All ER 539 : (1965) 3 WLR 1011 (CA)] (at All ER p. 544-I), “is not to be imputed to a statute if there is some other construction available”. Where to apply words literally would “defeat the obvious intention of the legislation and produce a wholly unreasonable result”, we must “do some violence to the words” and so achieve that obvious intention and produce a rational construction. [Per Lord Reid in Luke v. IRC [1963 AC 557 : (1963) 1 All ER 655 : (1963) 2 WLR 559 (HL)] where at AC p. 577 he also observed: (All ER p. 664-I) “This is not a new problem, though our standard of drafting is such that it rarely emerges.”]” 29. It was contended that in light of the above-stated prin ciples enunciated in the Constitution Bench decision, since the language of Section 2(1)(f) and 2(a)(zf) is unambiguous, the casus omissus cann ot be applied by a judicial interpretation process. It was submitted that there is no scope of reading something into, which it does not exist. INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] 30. Counsel for the respondents also placed strong reliance upon the judgment in the ICICI Bank Limited v. Official Liquidator of APS Star Industries and others 9 which centres around the Banking Regulation Act, 1949 and guidelines of RBI issued on the subject of inter se transfer of non-performing assets by Bank. It was h eld that the Banking Regulation Act, 1949 does not come in the way of such transfers. Banks/Banking Companies are covered under SARFAESI Act in any event. As such, transfers inter se bank would not give rise to the question of change in the nature of the lender leading to change in the status of applicability of SARFAESI Act. On that basis, it was s ubmitted that such a transfer would not change the status of a borrower who, if earlier created a security interest, continues to be a borrower of another secured creditor. However, in the present case, there is sought to be a complete change in the status of the borrower and that too without his consent. 31. The learned counsel, at the end, made a passionate plea about the far reaching consequences which may ensue if the appe llant is permitted to take recourse to the provisions of SARFAESI Act as debts would be transferred to SARFAESI companies to take advant age of that enactment. 32. After considering the aforesaid submission, we are of t he opinion that entire edifice is built on the pleas which are squarely answered in M.D. Frozen Foods and there is no reason to take a different view therefrom for the reasons that follow hereinafter. 33. In the instant case, loan was given by IBFSL which was not a financial institution covered by the SARFAESI Act when the loan was given. However, this entity has got merged with the a ppellant and appellant is a SARFAESI company. In this backdrop, the entire thrust of the argument of the respondent is that as a successor com pany, the appellant cannot take advantage. In order to deal with this aspect, we will have to first taken into consideration, the effect of such a merger scheme as approved by the High Court. It is to be kept in mind that the loan/debts/financial assets stood vested in the appellant pursuant to the amalgamation scheme filed by the two companies under Sections 391 and 394 of the Companies Act, 1956 whereunder the pr edecessor company, IBFSL got amalgamated with the appellant, the effect of such a merger is explained by this Court in Saraswati Industrial Syndicate Ltd. v. Commissioner of Income Tax 10 in the following manner: 9(2010) 10 SCC 1 10 1990(Supp) SCC 675 1121 “5. Generally, where only one company is involved in change and the rights of the shareholders and creditors are varied, it amounts to reconstruction or reorganisation of scheme of arrangement. In amalgamation two or more companies are fused into one by merger or by taking over by another. Reconstruction or ‘amalgamation’ has no precise legal meaning. The amalgamation is a blending of two or more existing undertakings into one undertaking, t he shareholders of each blending company become substantially the shareholders in the company which is to carry on the blended undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new company, or by the transfer of one or more undertakings to an existing company. Strictly ‘amalgamation’ does not cover the mere acquisition by a company of the share capital of other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See: Halsbury’s Laws of England (4th edition volume 7 para 1539). Two companies may join to form a new company, but there may be absorption or blending of one by the other, both amount to amalgamation. When two companies are merged and are so joined, as to form a third company or one is absorbed into one or blended with another, the amalgamating company loses its entity.” 34. Thus, on sanction of the scheme of amalgamation, all loans, recoveries, security, interest, financial documents, etc. in favour of IBFSL got transferred to and stood vested in the appellant including the loans given by IBFSL to respondent borrowers, debts recoverable by IBFSL from respondent borrowers in favour of IBFSL, security documen ts executed by respondent borrowers in favour of IBFSL, etc. On the sanctioning of the scheme, the respondent borrowers became the borrower of the appellant as if the financial assistanc e was granted by the appellant to the respondent borrowers. 35. There is a force in the contention by the appellant that t he debt with underlying securities is the asset of IBFSL and that IBFSL had right to transfer/assign its assets to any person without seeking consent of the borrower. Such transfer/assignment is recognized and that this Court in the case of Official Liquidator of APS Star Industries has recognised and upheld such an assignment. INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] 36. In the aforesaid backdrop, the factor which ass umes importance and has to be kept in mind is that the appellant is an assignee of a debt through the amalgamation of original lender with the appellant which was effected invoking the statutory provisions of the Companies Act. Once this is kept in mind, there would not be any difference as far as consequences in law are concerned from the case of M.D. Frozen Foods and this case. Therefore, M.D. Frozen Foods case would apply to the facts of this case in all force. 37. Further, it is too farfetched to argue that just to real ise the dues from the respondents, IBFSL and the appellant devised the plan of merger so as to attract the provisions of SARFAESI Act and we are not inclined to accept such a submission. Various judgments which are relied upon by the respondents also would not apply as we neither find it to be a case of the Court creating any legislation or supplying any casus omissus . 38. Apart from the factual parity, even legally the argum ents of the respondents do not carry any weight. The view taken in M.D. Frozen Foods is that the SARFAESI Act is retroactive in nature. In the process, the Court approved the Full Bench decision of the Orissa High Court in Sarthak Builders Pvt. Ltd., Chinta, Arunodaya Market, Cut tack & Another v. Orissa Rural Development Corporation Limited, Station Square, Bhubaneswar & 5 Ors.11 and made the following observations: “38… In case of retroactivity, the Parliament takes note of the existing conditions and promulgates the remedial measures t o rectify those conditions. In fact the SARFAESI Act, in our view, was to remedy such a position and provide a measure against secured interests. The scheme of the SARFAESI Act, is really to provide a procedural remedy against security interest al ready created. Therefore, an existing borrower, who had been granted financial assistance was covered under Section 2(f) of the said Act as a ‘borrower’. Not only this expression, the definition clauses dealing with ‘debt securities’, ‘financial assistance’, ‘f inancial assets’, etc., clearly convey the legislative inten t that the SARFAESI Act applies to all existing agreements irrespective of the fact whether the lender was a notified ‘financial institution’ on the date of the execution of the agreement with the borrowe r or 11 (2014) SCC Online Ori 75 1123 not. The scheme of the SARFAESI Act sets out an expeditiou s, procedural methodology, enabling the bank to take possession of the property for non-payment of dues, without intervention of the court. The mere fact that a more expeditious remedy is provided under the SARFAESI Act does not mean that it is substantive in character or has created an altogether new right. To accept the argument of the appellants would imply that they have an inherent right to delay the enforcement against the security interest! 39. The catena of judgments referred to by learned senior counsel for the appellants on substantive law not being retrospe ctive in operation, unless expressly stated so in the Act would, thus, have no application to the matter in issue, in view of what we have observed aforesaid. On the other hand, as observed by Buckley, L.J. in West v. Gwynne , retrospective operation is one matter and interference with existing rights is another. In that context, it was ruled that the provisions of the Conveyancing of Law and Property Act, 1892 were held applicable to leases containing a covenant, condition or agreement against assigning, under-letting or parting with possession or disposing of land or property leased witho ut license or consent to all leases whether executed before or afte r the commencement of the Act. Such a construction was held not to make the Act retrospective in operation but merely ef fected the future existing rights under all leases whether executed before or after the date of that Act. (Discussed in Trimbak Damodhar Raipurkar v. Assaram Hiraman Patil ). 40. In a similar vein, are the observations made in the case of In re Athlumney. Ex parte Wilson , where the question posed before the Queen’s Division Bench was whether Section 23 of the Bankruptcy Act, 1890 was retrospective in its operation. In t he aforementioned context, Wright, J., speaking for the Be nch, illuminatingly opined: “Perhaps no rule of construction is more firmly established than this — that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation, otherwise than as regards matter of procedure , unless that effect cannot be avoided without doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of either interpretation, it ought to be construed INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] as prospective only… it is a general rule that when the Legislature alters the rights of parties by taking away o r conferring any right of action, its enactments, unless in express terms they apply to pending actions, do not affect them… It is said that there is one exception to that rule, namely, that, where enactments merely affect procedure and do not extend to rights of action, they have been held to apply t o existing rights, and it is suggested here that the alter ation made by this section is within that exception…” (Emphasis supplied) 41. Similarly, the date on which a debt is declared as an NPA would again have no impact. We are, thus, of the view that the provisions of the SARFAESI Act would become applicable qua all debts owing and live when the Act became applicable to t he respondent in terms of the parameters contended by learned senior counsel for the respondent and enlisted at serial Nos. i to i v in para 18.” It, thus, follows that there is only a procedural change in respect of forum for recovery of debt and no substantive rights are aff ected. 39. In view of the aforesaid judgment, argument of the respondents herein predicated on Sections 69 and 69A of the Transfer of Property Act, which weighed with the High Court, is without any substance. 40. The aforesaid view also gets support from the judgment o f this Court in Mardia Chemicals Ltd. & Ors. v. Union of India & Ors.12 wherein the background and salient feature of the SARFAESI Act have been extensively discussed and analysed and the Court has also highlighted the objective behind enacting such a legislation. 41. These sentiments are echoed in the subsequent judgment i n the case of United Bank of India v. Satyawati Tondon and Others 13 wherein it was held that the Act is intended to give impetus to industrial development in the country by providing speedy procedure of recovery. On account of lack of infrastructure and manpower, regular courts were not able to cope with the speed in adjudication of recovery cases. In the light of recommendations of the Tiwari Committee, special tribunals came to be set up under the provisions of the Recovery of Debts Du e to 12 (2004) 4 SCC 311 13 (2010) 8 SCC 110 1125 Banks and Financial Institutions Act, 1993 for reco very of huge accumulated NPAs of the bank loans. On the recommendations of the Narasimham Committee and Andhyarujina Committee, SARFAESI Act was enacted to empower banks and financial instituti ons to take possession of the securities and to sell them without the intervention of the Court. In this regard, reference may be made to the following observations of this Court in the case of Satyawati Tondon : “1… With a view to give impetus to the industrial development of the country, the Central and State Governments encouraged the banks and other financial institutions to formulate liberal policies for grant of loans and other financial facilities to those who wanted to set up new industrial units or expand the existing units. Many hundred thousand took advantage of easy financing by the banks and other financial institutions but a large number of them did not repay the amount of loan, etc. Not only this, they instituted frivolous cases and succeeded in persuading the civil courts to pass orders of injunction against the steps taken by banks and fina ncial institutions to recover their dues. Due to lack of adequate infrastructure and non-availability of manpower, the regular courts could not accomplish the task of expeditiously adjudicating the cases instituted by banks and other financial institu tions for recovery of their dues. As a result, several hundred crores of public money got blocked in unproductive ventures. 2. In order to redeem the situation, the Government of India constituted a committee under the Chairmanship of Shri T. Tiwari to examine the legal and other difficulties faced by bank s and financial institutions in the recovery of their dues and sugg est remedial measures. The Tiwari Committee noted that the existing procedure for recovery was very cumbersome and suggested that special tribunals be set up for recovery of the dues of banks and financial institutions by following a summary procedure. The Tiwari Committee also prepared a draft of the proposed legislation which contained a provision for disposal of cases in three months and conferment of power upon the Recovery Officer for expeditious execution of orders made by adjudicating bodies. xx xx xx INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.] 16. Thus, the Act intends to provide remedy in respect of pre - existing loans. The interpretation that the Act will apply o nly to future debt transactions defeats the very purpose o f law of reducing the non-performing assets. This object is clearly mentioned in the Statement of Objects and Reasons. As noted in the case of Satyaivati Tondon amount of rupees one lakh twenty thousand crores was due to the banks in the year 2001 which had adversely affected the economy of the country. Obviously, the Act is intended to recover the said pre-existing loans b y the machinery provided under the SARFAESI Act. The pre-existing loans are not excluded from the purview of the Act. Similarly, the object of notifying the financial institution in question is to enable such institution to avail the provisions of SARFAESI Act in respect of existing loans. This salient object of the Act does not appear to have been noticed in Subash Chandra Panda. ” 42. We may also reproduce the following discussion from tha t judgment which completely answers most of the arguments ra ised by the learned counsel for the respondents: “17. Further, the settled principle of interpretation that while the statute affecting the substantive rights is presume d to be prospective, a statute changing the forum of remedy and t he procedure is retrospective has also not been kept in mind. These principles are the basis of the view taken in the Unique Engineering Works and Pradeep Kumar Gupta. The said considerations are valid and legitimate, supported by ample authority of binding precedents of the Apex Court, to which reference may be made and relevant observations extracted: 1. Rafiquennessa v. Lal Bahadur Chetri , AIR 1964 SC 1511 “9….. Mr. Chatterjee has relied upon the well-known observations made by Wright, J. in (Re Athlumney ex parte or Wilson (1898) 2 QBD 547) when the learned Judge said that it is a general rule that when the legislature alters the rights of parties by taking away or conferring any right of action, its enactments, unless in express terms they apply to pending actions, do not affect them. He added that there was one exception to that rule, namely that where enactments merely affect procedure and do not extend to rights of action, they have been held to apply to e xisting 1127 rights. In order to make the statement of the law relating to the relevant rule of construction which has to be adopted in dealing with the effect of statutory provisions i n this connection, we ought to add that retrospective operati on of a statutory provision can be inferred even in cases where such retroactive operation appears to be clearly implicit in the provision construed in the context where it occurs. In other words, a statutory provision is held to be retroactive either when it is so declared by express terms, or the intention to make it retroactive clearly follows fro m the relevant words and the context in which they occur .” (emphasis added)” 43. The aforesaid discussion, thus, leads us to conclu de that respondent No.1 would be treated as ‘borrower’ within the meaning of Section 2(1)(f) of the SARFAESI Act; the arrangemen t would be classified as ‘security arrangement’ under Section 2(1)(zb); the agreements created ‘security interest’ under Section 2(1)(zf) ; and the appellant became ‘secured creditor’ within the meaning of Section 2(1)(zd) of SARFAESI Act. 44. As a result, we hold that judgment of the High Court is erroneous and set aside the same. This appeal is allowed. No orders need to be passed in the contempt petitions, which stand disposed of. Kalpana K. Tripathy Appeal allowed. INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN CHRONICLE HOLDINGS LIMITED [A.K. SIKRI, J.]