2015 (9) TMI 1665 - HC - Indian Laws

Bank's Pre-Amendment Actions Under Securitisation Act Ruled Illegal

JILICHEM LABORATORIES (INDIA) LTD Versus UNION OF INDIA & 1

The court found the actions taken by the Respondent Bank under the Securitisation Act before the amendment in January 2013 to be illegal. The Bank was ... Vires of Section 2(1)(c)(iva) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and Section 2(d)(vi) of the Recovery of Debts due to the Banks and Financial Institution Act, 1993 - action taken under the Securitisation Act prior to the amendment under Securitisation Act - initiation of fresh action under Section 13 of the Securitisation Act. HELD THAT:- In the present case, action was initiated in any case, admittedly, prior to January, 2013 and therefore when the amending Act was not in force, action of the respondent Bank under the Securitisation Act at the given point of time cannot be maintained. However in any case, amending Act has come into force and the remedy under the Securitisation Act is available to the respondent Bank. Respondent Bank if desirous, may initiate action by issuing fresh Notice under Section 13 of the Securitisation Act in accordance with law. The action taken by the respondent No.2 Bank under the Securitisation Act prior to the amending Act, i.e. January, 2013 is held to be bad in law. Consequentially, property in question, possession of which is taken over, will be required to be reentrusted by respondent Bank to the petitioner by drawing appropriate Panchnama, with further condition that it would be open to the respondent Bank to deploy security for guarding of the property and there will be further prohibitory injunction against the petitioner not to transfer or alienate the possession, title or rights in the property in any manner whatsoever for a period of four months from the date of re-entrustment of the property by the respondent Bank to the respective petitioners. As the action taken by the Bank under the Securitisation Act prior to January, 2013 is not held to be legal and valid and is declared illegal, consequential action as that of authorisation or order passed under Section 14 of the Securitisation Act would also no more survive - Petition disposed off. Issues involved:Challenging the constitutionality of specific sections of the Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002, Recovery of debts due to bank and financial institutions act, 1993, and Banking Regulation Act, 1949; legality of actions taken by the Respondent Bank under the Securitisation Act; quashing of notices and proceedings initiated by the Respondent Bank.Analysis:1. Constitutionality of Specific Sections:The petitioner challenged the constitutionality of Section 2(1)(c)(iva) of the Securitisation Act, Section 2(d)(vi) of the RDDB Act, and Section 56 of the Banking Regulation Act. However, the petitioner's counsel conceded that these issues were previously addressed by the court in a different case. The court noted that actions taken by the Bank before the relevant amendments were not maintainable. The court directed the Bank to re-entrust possession of the property to the petitioner and allowed the Bank to initiate fresh action under the Securitisation Act post-amendment.2. Legality of Actions by Respondent Bank:The actions taken by the Respondent Bank under the Securitisation Act prior to the amendment in January 2013 were deemed illegal by the court. The Bank was directed to return possession of the property to the petitioner with certain conditions. The court allowed the Bank to take further action under the Securitisation Act by issuing a fresh notice under Section 13.3. Quashing of Notices and Proceedings:The court quashed the section 13(4) notices issued by the Bank and directed the re-entrustment of the property to the petitioner. The court also nullified any authorization or orders passed under Section 14 of the Securitisation Act due to the illegality of actions taken by the Bank. Other reliefs sought were not considered further in light of the directions given.4. Disposition of Petitions:Considering the facts and circumstances, all the petitions were disposed of accordingly with no order as to costs. The court's decision focused on the illegality of actions taken by the Bank before the relevant amendments and provided directions for re-entrustment of the property and the possibility of fresh action under the Securitisation Act.This detailed analysis highlights the court's findings and directives regarding the constitutionality of specific sections, the legality of actions by the Respondent Bank, and the quashing of notices and proceedings, ultimately leading to the disposal of all petitions.