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AI Drafter ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) whether a financial institution appointed as operating agency under the Sick Industrial Companies (Special Provisions) Act, 1985 loses its right to sell or assign its non-performing assets in favour of a third party; (ii) whether the borrower could compel the institution to accept its belated higher settlement offer and obtain equitable relief under Article 226 of the Constitution of India.
Issue (i): whether a financial institution appointed as operating agency under the Sick Industrial Companies (Special Provisions) Act, 1985 loses its right to sell or assign its non-performing assets in favour of a third party.
Analysis: Appointment as operating agency under the rehabilitation framework did not extinguish the lender's independent rights as a creditor. The grievance, if any, against the operating agency's conduct had to be raised before the Board for Industrial and Financial Reconstruction, and the Court found no statutory bar preventing transfer of the financial assets. The Court also held that the borrower could not challenge the assignment merely on the basis that the lender had a rehabilitation role under SICA.
Conclusion: The issue was decided against the borrower and in favour of the respondents.
Issue (ii): whether the borrower could compel the institution to accept its belated higher settlement offer and obtain equitable relief under Article 226 of the Constitution of India.
Analysis: The borrower had earlier made several lower settlement proposals and offered no contemporaneous assurance of performance when the lender completed the auction process. The Court treated the lender's decision to accept the secured and completed bid as a prudent commercial decision, found no basis for mala fides or violation of law, and reiterated that a defaulting borrower has no equity to obstruct recovery of public monies or to force acceptance of a last-minute offer.
Conclusion: The issue was decided against the borrower and in favour of the respondents.
Final Conclusion: The writ petition failed on merits, the interim protection stood vacated, and the contempt proceeding was also rejected.
Ratio Decidendi: A secured creditor retains the right to transfer its non-performing assets notwithstanding its appointment as operating agency, and a defaulting borrower cannot invoke equity under Article 226 to compel acceptance of a belated settlement or displace a lender's bona fide commercial decision.
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