2015 (6) TMI 218 - HC - Indian Laws

Court dismisses writ petition challenging legality of parallel proceedings under Securitization Act; emphasizes available remedies

M/s. HOTEL GAUDAVAN PVT. LIMITED Versus ALCHEMIST ASSET RECONSTRUCTION CO. LTD. & ORS.

The court dismissed the writ petition challenging the legality of parallel proceedings under the Securitization and Reconstruction of Financial Assets and ... Legality of the proceedings initiated under Section 14 of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - petitioner is aggrieved by the measures adopted by the respondent-AARCL for enforcement of the security interest in terms of sub-section (4) of Section 13 of the Act - Held that:- As per provisions of sub-section (3) of Section 17, if the Tribunal after examining the facts and circumstances of the case and the evidence produced by the parties, comes to the conclusion that any measures referred to in sub-section (4) of Section 13 by the secured creditor are not in accordance with the provisions of the Act or the Rules made thereunder, it can declare the recourse to any one or more measures referred to in sub-section (4) of Section 13 taken by the secured creditor as invalid and restore the possession of the secured asset to the borrower. Moreover, as stated by counsel appearing on behalf of the respondent-AARCL at the bar, the petitioner has already availed the remedy available under Section 17 of the Act before the Tribunal. - Present matter does not suggest any special feature warranting interference by this court in exercise of its extra ordinary jurisdiction under Article 226 of the Constitution of India, by passing the effective and efficacious statutory remedy available under the relevant statute. - Decided against appellant. Issues:Challenge to legality of proceedings under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.Detailed Analysis:1. Background and Facts:The respondent-State Bank of India (SBI) provided a term loan to the petitioner, which turned into a Non-Performing Asset (NPA) due to payment defaults. SBI initiated recovery proceedings before the Debt Recovery Tribunal, Jaipur. Subsequently, SBI assigned its financial assets to Alchemist Asset Reconstruction Co. Ltd. (AARCL) under Section 5 of the Act. AARCL, as the new applicant, began parallel proceedings under Section 13 of the Act while the original application was pending before the Tribunal.2. Petitioner's Contentions:The petitioner challenged the legality of AARCL's actions under Section 14 of the Act, arguing that parallel proceedings were improper. The petitioner claimed the right to a hearing before any order under Section 14 and criticized the bank's possession of the secured asset during Tribunal proceedings as illegal and arbitrary.3. AARCL's Defense:AARCL contended that the petitioner had already sought relief under Section 17 of the Act against AARCL's enforcement measures. AARCL argued that since the petitioner had availed themselves of the statutory remedy, the writ petition should be dismissed. AARCL cited relevant Supreme Court decisions to support its position.4. Court's Analysis and Decision:The court noted that the challenge was not against the District Magistrate's order under Section 14. It acknowledged the petitioner's grievance against AARCL's actions during Tribunal proceedings. The court highlighted the availability of an appeal under Section 17 for such grievances. It emphasized that the Tribunal could declare AARCL's actions invalid and restore possession to the borrower if found non-compliant with the Act. Since the petitioner had already utilized the remedy under Section 17, the court found no exceptional circumstances warranting interference under Article 226 of the Constitution. Consequently, the writ petition was dismissed, with the petitioner retaining the right to challenge AARCL's actions before the Tribunal without any cost implications.In summary, the court upheld the statutory remedy available under the Act and emphasized the importance of exhausting available legal avenues before seeking extraordinary intervention.