2005 (6) TMI 294 - HC - Companies Law

Court quashes time-barred notice under section 13(2) of Act, upholding petitioner's challenge

The High Court allowed the Writ Application, finding the notice issued under section 13(2) of the Act to be without jurisdiction due to being time-barred ... Enforcement of security interest Issues:1. Jurisdiction of notice issued under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.2. Availability of alternative remedy under section 13(4) of the Act.3. Applicability of limitation period under section 36 of the Act to the notice issued.Analysis:Issue 1: Jurisdiction of notice under section 13(2) of the ActThe petitioner challenged the notice issued to her under section 13(2) of the Act, contending that it was without jurisdiction due to being barred by the law of limitation. The petitioner approached the High Court under article 226 of the Constitution of India seeking to quash the notice, as no other equitable remedy was available. The respondent argued that the Act empowers the secured creditor to issue such a notice and highlighted the right of appeal available under section 13(4) of the Act before the Debts Recovery Tribunal. The High Court observed that even if an alternative remedy is available, jurisdiction under article 226 can be invoked if the alternative remedy is not efficacious or if the action challenged is without jurisdiction.Issue 2: Availability of alternative remedy under section 13(4) of the ActThe respondent contended that the Writ Application was premature as an alternative remedy by way of appeal under section 13(4) was available. However, the petitioner argued that the Writ Court could exercise jurisdiction under article 226 if the alternative remedy was not efficacious and the action was without jurisdiction. The High Court noted that self-restraint, not a legal bar, prevented the exercise of jurisdiction under article 226 when an alternative remedy existed. The Court emphasized that if an order or action was without jurisdiction or violated principles of natural justice, invoking article 226 was permissible.Issue 3: Applicability of limitation period under section 36 of the ActThe petitioner's counsel drew attention to section 36 of the Act, which prohibits a secured creditor from taking measures under section 13(4) unless the claim is made within the period of limitation prescribed under the Limitation Act, 1963. The counsel argued that the notice issued was time-barred as the loan and guarantee were executed in 1981, exceeding the limitation period. The High Court agreed with this contention, citing that the action of the bank in issuing the notice under section 13(2) was barred by time as per section 36 of the Act. Consequently, the High Court quashed the notice and subsequent public notice issued by the bank.In conclusion, the High Court allowed the Writ Application, finding the notice issued under section 13(2) of the Act to be without jurisdiction due to being time-barred. The Court emphasized the applicability of the limitation period under section 36 of the Act and upheld the petitioner's challenge to the notice, thereby quashing it along with the subsequent public notice.