SARFAESI recovery powers upheld as constitutional, with mandatory collective creditor consent required for multiple secured creditors.

Section 13 of the SARFAESI Act was upheld against an Article 14 challenge because the provision applies to a defined class of secured debt defaults, carries a presumption of constitutionality, and gives the borrower notice under section 13(2) before measures under section 13(4) are taken. The article also states that where there are multiple secured creditors, section 13(9) requires prior consent of creditors representing not less than three-fourths of the outstanding amount before action under section 13(4) can proceed. The statute is treated as a special recovery measure for bank dues and its consent safeguard is mandatory where applicable.

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Issues: (i) Whether section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is unconstitutional as violative of Article 14 of the Constitution of India. (ii) Whether action under section 13(4) can be taken only with the consent of secured creditors representing not less than three-fourths of the outstanding amount under section 13(9).

Issue (i): Whether section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 is unconstitutional as violative of Article 14 of the Constitution of India.

Analysis: The provision was upheld against the challenge of arbitrariness. The Court applied the presumption of constitutionality and noted that the burden lies on the challenger to establish invalidity. It held that the statute deals with a defined class of cases involving secured creditors, secured debts, default, and classification of the debt as a non-performing asset. The Court further held that notice under section 13(2) affords an opportunity to the borrower to respond before measures under section 13(4) are taken, and that this satisfies natural justice. The statute was also treated as a special enactment intended to address recovery of bank dues and to override contrary provisions to the extent of the field it covers.

Conclusion: Section 13 was held to be constitutionally valid and the challenge under Article 14 failed.

Issue (ii): Whether action under section 13(4) can be taken only with the consent of secured creditors representing not less than three-fourths of the outstanding amount under section 13(9).

Analysis: The Court read section 13(9) as making prior agreement of secured creditors representing not less than three-fourths of the outstanding amount a condition for action under section 13(4) where there is more than one secured creditor. It declined to decide the factual dispute regarding the present consent position, but clarified the legal requirement that section 13(4) action cannot proceed in violation of section 13(9).

Conclusion: Section 13(9) was held to be mandatory for action under section 13(4) in cases involving multiple secured creditors.

Final Conclusion: The writ petition failed on the constitutional challenge, while the statutory safeguard in favour of collective secured-creditor consent was affirmed.

Ratio Decidendi: A statutory recovery measure for secured creditors is not invalid under Article 14 merely because it is drastic, if it is confined to a defined class of defaults and provides prior notice, and collective consent requirements must be complied with where the statute so mandates.

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