SARFAESI secured creditor threshold upheld; police assistance order valid and BIFR reference abated on statutory value test.

District Magistrate's order granting police assistance under section 14 of the SARFAESI Act was upheld because the record showed consideration of the secured creditor's papers, notice to the borrower, and default in repayment; no material fact essential to the application was shown to have been ignored. On abatement of the BIFR reference under the Sick Industrial Companies Act, the text states that only creditors falling within the SARFAESI definition of "secured creditor" are counted for section 13(9) and the third proviso to section 15. As the invoking creditors held more than 60% in value, the statutory threshold was met and the pending reference abated.

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Issues: (i) whether the District Magistrate's order granting police assistance under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was vitiated for non-consideration of relevant materials; (ii) whether secured creditors representing the requisite value had validly invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 so as to attract abatement of the pending reference under the Sick Industrial Companies (Special Provisions) Act, 1985.

Issue (i): whether the District Magistrate's order granting police assistance under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was vitiated for non-consideration of relevant materials.

Analysis: The order recorded consideration of the papers and documents placed by the secured creditor, noticed that reasonable opportunity had been afforded to the borrower, and found default in repayment with interest. The District Magistrate had taken the relevant facts into account for the limited exercise under section 14. No material showed that the authority was uninformed about any fact essential to the application.

Conclusion: The order under section 14 was valid and no infirmity was found in it.

Issue (ii): whether secured creditors representing the requisite value had validly invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 so as to attract abatement of the pending reference under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The expression "secured creditor" in section 13(9) was construed with reference to the definition in section 2(zd) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Creditors who may be secured creditors under the Companies Act, 1956 do not necessarily answer that description under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. On the facts, the secured creditors who had invoked action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 held more than 60% in value, and the value represented by those creditors also crossed the statutory threshold in the third proviso to section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. The pending BIFR reference accordingly stood abated.

Conclusion: The requisite statutory threshold was satisfied and the invocation under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was upheld.

Final Conclusion: The writ petition failed on both issues and the challenge to the District Magistrate's order and the asserted BIFR protection was rejected.

Ratio Decidendi: For the purposes of section 13(9) and the third proviso to section 15, only those creditors who fall within the definition of secured creditor under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are counted, and where their collective value satisfies the statutory threshold, the BIFR reference abates.

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