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of <h1>Court dismisses writ petition challenging SARFAESI Act notice; emphasizes creditor cooperation; proceedings not abated; SICA Section 22 applies</h1> <h3>Salem Textiles Ltd. Versus Authorised Officer, Phoenix Arc (P.) Ltd.</h3> The court dismissed the writ petition challenging the notice under section 13(2) of the SARFAESI Act, holding that the notice did not amount to taking ... Notice issued under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 challenged Held that:- In this case, indisputably, there are other secured creditors who have not even issued any notice under section 13(2) of the SARFAESI Act. Thus the creditors representing not less than three-fourths in value of the amount outstanding, have not taken measures to recover the said secured debt under section 13(4) of the SARFAESI Act and therefore, as per the second proviso to section 15(1) of the SICA, the proceeding pending before the BIFR has not abated and so, the bar under section 22 of the SICA is applicable. Therefore, in the instant case, section 22 of the SICA is a bar for any further proceedings to be initiated by the first respondent under section 13(4) of the SARFAESI Act. As we have noticed, the prayer in this writ petition is for quashing the notice issued under section 13(2) of the SARFAESI Act. In our considered opinion, as we have held supra, since the notice under section 13(2) of the SARFAESI Act does not constitute a measure to exercise the power of the first respondent under section 13(4) of the SARFAESI Act, the said notice cannot be quashed at all. It is for the petitioner either to comply with the demand or to send a proper reply for the said notice and thereafter, it is for the first respondent to act according to law by complying with section 13(9) of the SARFAESI Act as well as the second proviso to section 15(1) of the SICA. Appeal dismissed. Issues:Challenge to notice under section 13(2) of the SARFAESI Act; Applicability of section 22 of the SICA; Abatement of proceedings before BIFR; Interpretation of provisions under SARFAESI Act and SICA.Analysis:1. Challenge to Notice under SARFAESI Act:The petitioner, a company facing financial difficulties, challenged a notice issued under section 13(2) of the SARFAESI Act by the first respondent claiming a substantial sum due. The petitioner argued that they were protected under section 22 of the SICA, making the SARFAESI Act proceedings jurisdictionally flawed as the petitioner had not taken measures to recover the secured debt as required under the SICA.2. Applicability of Section 22 of the SICA:The petitioner contended that section 22 of the SICA provided protection, preventing further proceedings under the SARFAESI Act. The first respondent argued that the second proviso to section 15(1) of the SICA mandated that the petitioner's proceedings before the BIFR would abate unless secured creditors representing a majority had taken measures to recover the debt under the SARFAESI Act.3. Abatement of Proceedings before BIFR:The court analyzed the proviso under SICA, which stated that pending references before the BIFR would abate if secured creditors representing a significant portion had initiated recovery measures under the SARFAESI Act. The court found that mere issuance of a notice under section 13(2) of the SARFAESI Act did not constitute taking measures to recover the debt, as required by the proviso.4. Interpretation of Provisions under SARFAESI Act and SICA:The court examined sections 13(2) and 13(9) of the SARFAESI Act to determine that the issuance of a notice did not automatically trigger the exercise of rights under section 13(4). The court emphasized that cooperation among secured creditors was necessary before proceeding to recover the debt under section 13(4) of the SARFAESI Act. In this case, as other secured creditors had not taken similar actions, the court held that the proceedings had not abated and section 22 of the SICA applied, barring further action under the SARFAESI Act.5. Conclusion:The court dismissed the writ petition challenging the notice under section 13(2) of the SARFAESI Act, clarifying that the notice could not be quashed as it did not constitute a measure to exercise the power under section 13(4) of the SARFAESI Act. The court directed the petitioner to either comply with the demand or respond appropriately, leaving further action to the first respondent in accordance with the SARFAESI Act and the SICA.
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