2006 (6) TMI 221 - HC - Companies Law

Court dismisses petition challenging borrower status under Securitisation Act

The court dismissed the petition, rejecting the petitioners' claims that they were not borrowers under the Securitisation and Reconstruction of Financial ... Enforcement of security interest Issues Involved:1. Validity of the petitioners' claim that they are not borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002.2. Whether the Bank of Baroda can take action against the petitioners under the Act.3. Compliance with the procedural requirements of the Act by the Bank of Baroda.4. The petitioners' right to appeal under Section 17 of the Act.Issue-wise Detailed Analysis:1. Validity of the Petitioners' Claim:The petitioners argued that they were not borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002, as they had never given the property in question as security to the respondent Bank. They contended that they purchased the flat through a registered sale deed and had verified the title documents, asserting their status as bona fide purchasers. The court found this argument unreasonable and against morality, noting that accepting such a claim would nullify the entire Act and allow borrowers to evade their debts by transferring properties.2. Bank of Baroda's Right to Take Action:The petitioners claimed that since they were not borrowers, the Bank of Baroda could not be a secured creditor, and thus, the bank had no authority to take action against them under the Act. The court rejected this argument, emphasizing that the identity of the property as a secured asset is crucial, and the relationship between borrower and secured creditor is not the sole determinant. The court noted that the petitioners' remedy lies against those who duped them by selling a mortgaged property, not against the bank.3. Compliance with Procedural Requirements:The petitioners argued that the Bank of Baroda did not comply with Section 13 of the Act, particularly the requirement to serve a notice under sub-section (2). They contended that they were not served with such a notice and that the notice issued was not addressed to them. The court found this argument unconvincing, stating that accepting it would undermine the Act's purpose. The court noted that the petitioners could appeal under Section 17 if they believed the bank had not followed the prescribed procedure.4. Right to Appeal:The court highlighted that Section 17 of the Act provides a right to appeal to 'any person' aggrieved by the measures taken by a secured creditor. This includes individuals like the petitioners who are affected by the bank's actions. The court emphasized that the appropriate forum to address disputed facts, such as the bank's status as a secured creditor, is through an appeal, not a petition before the court.Conclusion:The court dismissed the petition, finding no substance in the petitioners' arguments. It vacated the status quo granted earlier and rejected the request to continue it. The court indicated that the petitioners' grievances should be addressed through the appeal process provided under the Act.