Bank's Security Rights Upheld in Liquidation Case; SARFAESI Act Applicable; Deed Validity Confirmed

The court directed the Provisional Liquidator to hand over possession of the secured assets to the applicant, a bank, allowing them to enforce their security interest under the SARFAESI Act despite the company being in liquidation. The court upheld the validity of the Deed of Assignment between the bank and SBI, stating objections could be raised in the appropriate forum. It clarified that the applicant's rights under the Deed were not affected by non-registration under the Companies Act. Additionally, the court affirmed that challenges to SARFAESI Act actions should be addressed at the DRT, not the Company Court.

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Issues Involved:
1. Whether the Provisional Liquidator can be directed to hand over the possession of the secured assets to the applicant based on the Deed of Assignment between SBI and the applicant.
2. Validity and enforceability of the Deed of Assignment.
3. Compliance with the provisions of the Companies Act, 1956, specifically Sections 125 and 135.
4. Applicability of SARFAESI Act and its provisions in the context of company liquidation.
5. Jurisdiction of the Company Court vis-a-vis the Debts Recovery Tribunal (DRT) under SARFAESI Act.

Detailed Analysis:

1. Whether the Provisional Liquidator can be directed to hand over the possession of the secured assets to the applicant based on the Deed of Assignment between SBI and the applicant:

The court examined whether the applicant, Kotak Mahindra Bank, as a secured creditor, could enforce its security interest under the SARFAESI Act despite the company being in liquidation. It was established that the applicant had initiated measures under the SARFAESI Act and had taken symbolic possession of the assets before the Official Liquidator took physical possession. The court concluded that the applicant is entitled to proceed with the enforcement of the securities under the SARFAESI Act.

2. Validity and enforceability of the Deed of Assignment:

The Deed of Assignment executed between SBI and the applicant on 23.3.2006 was scrutinized. The court observed that the Deed was registered by the competent authority and no objections were raised by the said authority. It was also noted that the stamp duty was adjudicated and duly paid by the applicant. The court dismissed the objections regarding the validity of the Deed of Assignment, stating that such issues could be raised before the appropriate forum but not in the current proceedings.

3. Compliance with the provisions of the Companies Act, 1956, specifically Sections 125 and 135:

The court addressed the contention that the applicant had not registered the charge under Sections 125 and 135 of the Companies Act. It was noted that SBI had registered the charge over the secured assets, and as an assignee, the applicant was not required to register the charge again. The court relied on various judgments from different High Courts, concluding that the non-registration of the assignment did not affect the applicant's rights to enforce the security interest.

4. Applicability of SARFAESI Act and its provisions in the context of company liquidation:

The court referred to several judgments, including those from the Supreme Court, to establish that the SARFAESI Act allows secured creditors to enforce their security interests without the intervention of the company court. It was emphasized that the SARFAESI Act overrides the Companies Act to the extent of any inconsistency, allowing the secured creditor to proceed with the sale of secured assets even when the company is in liquidation.

5. Jurisdiction of the Company Court vis-a-vis the Debts Recovery Tribunal (DRT) under SARFAESI Act:

The court clarified that the jurisdiction to challenge actions under the SARFAESI Act lies with the DRT and not the Company Court. It was noted that the Official Liquidator had filed an appeal before the DRT, which was dismissed for default. The court reiterated that the appropriate forum for challenging the actions under the SARFAESI Act is the DRT, and the Company Court does not have the jurisdiction to interfere in such matters.

Conclusion:

The court directed the Provisional Liquidator to hand over possession of the secured assets to the applicant and allowed the applicant to proceed further under the SARFAESI Act, subject to compliance with the provisions of Section 13(9) of the Act. The judgment was stayed for three weeks to allow the intervenor to approach the Division Bench.

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