2010 (7) TMI 281 - HC - Companies Law

Court dismisses petition challenging SARFAESI Act proceedings, upholds bank's actions. Petitioner advised to seek remedy at Debts Recovery Tribunal.

The court dismissed the writ petition challenging proceedings under the SARFAESI Act, 2002, finding no illegality in the respondent bank's actions. It ... Notice issued under section 13(2) of the SARFAESI Act, 2002 challenged - Held that:- in the present case, the petitioner is aggrieved against the impugned notice issued under section 13(2) of the SARFAESI Act, 2002 and the petitioner-company has also submitted objection, which have not be accepted by the respondent-bank. The petitioner-company in case an order is passed against it under section 13(4) of the SARFAESI Act, 2002, has got an alternative remedy available under the SARFAESI Act, 2002 before the Debts Recovery Tribunal under section 17 of the said Act, and therefore, keeping in view the judgment delivered by the Division Bench of the Madras High Court in the case of Digivision Electronics Ltd. v. Indian Bank [2005 (7) TMI 358 - HIGH COURT OF MADRAS] the petitioner does have a right of appeal to the Debts Recovery Tribunal under section 17, and therefore, no case is made out for interference in the matter, in the peculiar facts and circumstances of the case. The present writ petition is dismissed. Issues Involved:1. Jurisdiction and legality of proceedings under the SARFAESI Act, 2002.2. Violation of Articles 14, 19, and 21 of the Constitution of India.3. Violation of Section 22 of the SICA, 1985.4. Violation of Section 13(9) of the SARFAESI Act, 2002.5. Authority of respondent No. 2 to issue notice under Section 13(2) of the SARFAESI Act, 2002.6. Alleged violation of the Banking Regulation Act, 1949.Detailed Analysis:1. Jurisdiction and Legality of Proceedings under the SARFAESI Act, 2002:The petitioner-company challenged the proceedings initiated by Canara Bank under the SARFAESI Act, 2002, claiming them to be illegal and without jurisdiction. The court referred to the case of *Mardia Chemicals Ltd. v. Union of India* [2004] 120 Comp Cas 373, where it was held that the borrower does not have the right to approach the court at the stage of notice under Section 13(2). The court found no illegality in the respondent bank's actions and stated that the petitioner has the remedy of approaching the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, 2002, if any action is taken under Section 13(4).2. Violation of Articles 14, 19, and 21 of the Constitution of India:The petitioner argued that the proceedings under the SARFAESI Act, 2002, were arbitrary and violative of Articles 14, 19, and 21 of the Constitution of India. The court did not find merit in this argument, emphasizing that the petitioner has the right to appeal to the Debts Recovery Tribunal under Section 17 of the SARFAESI Act, 2002, thus ensuring a fair process.3. Violation of Section 22 of the SICA, 1985:The petitioner claimed that the proceedings under the SARFAESI Act, 2002, violated Section 22 of the SICA, 1985, which provides protection to sick industrial companies. The court referred to the judgment in *Noble Aqua P. Ltd. v. State Bank of India* [2009] 148 Comp Cas 817, where it was held that the protection under Section 22 of the SICA is not available if the secured creditors representing not less than three-fourths in value have taken measures under Section 13(4) of the SARFAESI Act. The court concluded that the protection under Section 22 of the SICA, 1985, is not available to the petitioner-company in view of Section 35 of the SARFAESI Act, 2002.4. Violation of Section 13(9) of the SARFAESI Act, 2002:The petitioner contended that the notice issued under Section 13(2) of the SARFAESI Act, 2002, violated Section 13(9), which requires the consent of secured creditors representing not less than three-fourths in value. The court found that respondents Nos. 1 and 2 had the consent of all other banks representing more than three-fourths of the outstanding dues against the petitioner, as per the details provided in the notice itself.5. Authority of Respondent No. 2 to Issue Notice under Section 13(2) of the SARFAESI Act, 2002:The petitioner argued that respondent No. 2 did not have the authority to issue the notice as respondent No. 3-bank is not registered as a Securitisation or Assets Reconstruction Company. The court clarified that respondent No. 3 is a banking company registered under the Banking Regulation Act, 1949, and is a secured creditor as defined under Section 2(zd) of the SARFAESI Act, 2002. Therefore, respondent No. 2 had the authority to issue the notice.6. Alleged Violation of the Banking Regulation Act, 1949:The petitioner claimed that the proceedings under the SARFAESI Act, 2002, violated the Banking Regulation Act, 1949. The court did not find any substantive argument or evidence from the petitioner to support this claim and thus did not address it in detail.Conclusion:The court dismissed the writ petition, stating that the petitioner has an alternative remedy available under the SARFAESI Act, 2002, before the Debts Recovery Tribunal. The court found no merit in the petitioner's arguments and upheld the actions of the respondent bank under the SARFAESI Act, 2002. The petition was dismissed with no order as to costs.