2019 (4) TMI 1825 - HC - Insolvency and Bankruptcy

High Court sets aside SARFAESI Act proceedings as petitioner not liable for deceased father's debt

The High Court ruled in favor of the petitioner, setting aside the proceedings against him. The court emphasized the absence of a financial relationship ... Maintainability of petition - alternate remedy of appeal - Repayment of debt - Section 13(2) read with Section 13(4) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - HELD THAT:- This Court has taken a view that Section 18 of the Recovery of Debts and Bankruptcy Act of 1993 protects the jurisdiction of this Court exercising its power under Articles 226 and 227 of the Constitution of India and therefore, wherever jurisdiction of the Debts Recovery Tribunal conferred upon it by Section 17 of the Act of 1993 is challenged, a remedy in the nature of writ petition under Articles 226 and 227 of the Constitution of India would always be maintainable. Thus, we need not say anything more on this issue which is already set at rest. The facts would clearly show that the petitioner has no liability whatsoever to satisfy the debt incurred by M/s. Ideal Energy Projects Limited for whom his deceased father stood as guarantor and as such, the petitioner could not have been joined as a party-respondent to the ongoing proceedings before the Debts Recovery Tribunal, New Delhi. These proceedings are without jurisdiction, insofar as the present petitioner is concerned and the same are liable to be quashed and set aside. Petition allowed. Issues:1. Validity of notice issued under SARFAESI Act for debt repayment.2. Jurisdiction of the High Court in entertaining the petition despite an alternate remedy.3. Existence of financial or fiduciary relationship between the petitioner and the respondent-Bank.4. Liability of the petitioner to satisfy the debt incurred by a third party.Analysis:1. The petitioner challenged a notice issued by the respondent-Bank under the SARFAESI Act for debt repayment, claiming he had no financial or fiduciary relationship with the Bank as he was neither a borrower nor a guarantor. The petitioner argued that the notice should be quashed and set aside as he did not benefit from the loan facility extended to a third party by the Bank.2. The respondent-Bank contended that the petitioner had an alternate remedy available but not availed. However, the High Court rejected the objection on the ground of an alternate remedy, citing that the jurisdiction under the Recovery of Debts and Bankruptcy Act of 1993 protected the High Court's authority under Articles 226 and 227 of the Constitution, making the writ petition maintainable.3. The Court emphasized that for the SARFAESI Act and the Act of 1993 to apply, a financial relationship must exist between the parties involving financial assistance and guarantee obligations. In this case, the notice lacked the necessary financial characteristics, leading to the conclusion that the proceedings initiated against the petitioner were not maintainable under Section 19 of the Act of 1993.4. The notice issued by the Bank targeted legal representatives of the deceased guarantor who had succeeded to the estate, excluding the petitioner. It was established that the petitioner did not inherit any assets from his deceased father, and therefore, had no liability to repay the debt incurred by the third party. Consequently, the High Court allowed the petition, quashing the proceedings against the petitioner before the Debts Recovery Tribunal in New Delhi.In conclusion, the High Court ruled in favor of the petitioner, setting aside the proceedings against him and emphasizing the absence of a financial relationship or liability on his part to satisfy the debt incurred by a third party, leading to the quashing of the notice issued under the SARFAESI Act.