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of <h1>Court upholds legality of debt assignment by Banking Company - Petition challenging possession notice dismissed</h1> <h3>M/s Sachdeva & Sons Rice Mills Ltd. Versus Kotam Mahindra Bank Ltd and others</h3> M/s Sachdeva & Sons Rice Mills Ltd. Versus Kotam Mahindra Bank Ltd and others - TMI Issues Involved:1. Validity of the possession notice dated 20.09.2012.2. Legality of the assignment of debt to respondent No.1.3. Status of respondent No.1 as an agent and its implications on debt assignment.Summary:1. Validity of the Possession Notice Dated 20.09.2012:The petitioner challenged the possession notice dated 20.09.2012 (P-19) issued consequent to the deed of assignment executed by a secured creditor in favor of respondent No.1 - Bank on 27.09.2007. The petitioner argued that respondent No.1 was not registered with the Reserve Bank of India as required u/s 3 in terms of Section 2(1)(z) and (za) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (the Act), making the assignment of assets an offense u/s 29 of the Act. The court found no merit in the petition, stating that the assignment of debt is permissible u/s 130 of the Transfer of Property Act, 1882, and respondent No.1 is a Banking Company registered under the Banking Regulation Act, 1949 with the Reserve Bank of India.2. Legality of the Assignment of Debt to Respondent No.1:The petitioner contended that the assignment of debt to respondent No.1 was illegal as it was not registered with the RBI. The court disagreed, referencing the Supreme Court judgment in ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited, (2010) 10 SCC 1, which upheld the legality of inter-bank assignment of debts. The court emphasized that the Banking Regulation Act, 1949, allows banks to transfer their assets, including debts, inter se, and such transfers are not prohibited under the Act. The court also noted that the guidelines issued by the RBI authorize banks to deal in NPAs to clean their balance sheets, which falls within the ambit of Section 21 read with Section 35-A of the Banking Regulation Act, 1949.3. Status of Respondent No.1 as an Agent and Its Implications on Debt Assignment:The petitioner argued that respondent No.1 was appointed as an agent and thus could not be assigned the debts. The court found this argument untenable, stating that there was no restriction in the loan documents prohibiting the assignment of debt to another banking company. The court noted that the petitioner and its group companies had approached respondent No.1 for assistance in raising funds and liquidating debts. Since there was no embargo on respondent No.1 acting in any other capacity, the assignment of debt by secured creditors to respondent No.1 did not suffer from any patent illegality. The court highlighted that the petitioner had initially submitted a settlement offer to respondent No.1, acknowledging its role in the debt assignment.Conclusion:The court dismissed the petition, upholding the validity of the possession notice and the legality of the debt assignment to respondent No.1. The court found no merit in the arguments presented by the petitioner regarding the registration status of respondent No.1 and its role as an agent.
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