Court upholds SARFAESI Act notice, dismisses writ petitions challenging actions. Alternative remedies available.

The court dismissed the writ petitions challenging the notice issued under Section 13(2) of the SARFAESI Act, 2002, and upheld the actions of the respondents. It emphasized the availability of alternative remedies for the petitioner, highlighted the overriding effect of the SARFAESI Act over SICA, and concluded that the Draft Rehabilitation Scheme (DRS) lacked statutory force without BIFR's sanction. The court held that the respondents were justified in invoking their rights under the SARFAESI Act, leading to the abatement of the reference before BIFR.

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Issues Involved:
1. Quashing of notice issued under Section 13(2) of SARFAESI Act, 2002.
2. Declaration regarding the actions of respondents resiling from the Draft Rehabilitation Scheme (DRS).
3. Direction to BIFR to sanction the DRS.

Detailed Analysis:

1. Quashing of Notice Issued Under Section 13(2) of SARFAESI Act, 2002:
The petitioner sought to quash the notice issued by the second respondent under Section 13(2) of the SARFAESI Act, 2002. The second respondent, a government company, had issued the notice after the petitioner failed to comply with the One Time Settlement (OTS) terms. The petitioner argued that the notice was premature as the Draft Rehabilitation Scheme (DRS) was pending approval by the Board for Industrial and Financial Reconstruction (BIFR). However, the court noted that the petitioner had already filed objections to the notice, which were examined and rejected by the second respondent. The court emphasized that a notice under Section 13(2) is a show-cause notice and does not constitute a cause of action for a writ petition. The court held that the petitioner has an alternative remedy under Section 17 of the SARFAESI Act by appealing to the Debts Recovery Tribunal (DRT). Therefore, the writ petition challenging the notice was dismissed.

2. Declaration Regarding the Actions of Respondents Resiling from the Draft Rehabilitation Scheme (DRS):
The petitioner contended that the second and third respondents resiled from their positions after having approved the DRS. The second respondent argued that the petitioner had failed to adhere to the OTS terms, leading to the invocation of SARFAESI Act provisions. The court observed that the DRS had not been sanctioned by BIFR, and thus, it had no statutory force. The court further noted that the second and third respondents had valid reasons to withdraw their consent, given the petitioner's failure to meet the OTS obligations. The court concluded that the respondents did not resile from their commitments under the DRS as the scheme was still at the reference stage and not legally binding.

3. Direction to BIFR to Sanction the DRS:
The petitioner sought a direction to BIFR to sanction the DRS. The court analyzed the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) and SARFAESI Act, 2002. It highlighted that the SARFAESI Act has an overriding effect over other laws, including SICA, as per Section 35 of the SARFAESI Act. The court pointed out that the DRS requires BIFR's sanction to become effective, and until such sanction is granted, the scheme remains at the reference stage. The court also noted that the second and third respondents, representing more than three-fourths of the secured creditors, had invoked their rights under Section 13(4) of the SARFAESI Act, leading to the abatement of the reference before BIFR. Consequently, the court held that there was no legal duty on BIFR to sanction the DRS, and the petitioner's request for such a direction was untenable.

Conclusion:
The court dismissed the writ petitions, upholding the actions of the second and third respondents under the SARFAESI Act, 2002. It emphasized the overriding effect of the SARFAESI Act over SICA and the availability of alternative remedies for the petitioner. The court concluded that the DRS had not come into existence as it lacked BIFR's sanction, and the respondents were justified in invoking their rights under the SARFAESI Act.

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