2016 (11) TMI 1071 - HC - Indian Laws

Court directs company to seek remedy at DRT under amended law, grants interim protection for three weeks

Samtel Color Ltd. Versus State Bank of India

The court found that the petitioner company had an alternative remedy under the amended Section 17 of the Act of 2002. The petitioner was directed to file ... E-auction and sale of immovable properties of a defaulting debtor - Held that:- The petitioner company has an alternative remedy under Section 17 of the Act of 2002 as amended effective 1-9-2016. The petitioner shall be free to file an application before the Debt Recovery Tribunal challenging the public notice dated 11-7-2016 or any other order/ notice issued by the respondent bank. The application under Section 17 of the Act of 2002 if filed by the petitioner company within three weeks from today be decided on merits. As the petitioner company is enjoying protection of this court effective interim order dated 26-8-2016 passed prior to amendment of Section 17 of the Act of 2002 on 1-9- 2016, the said interim protection shall continue for the benefit of the petitioner company for a period of three weeks from the date of this order. It is however made clear that this extended interim protection granted by this court is in the special facts of the case and will not influence any order interim or otherwise to be passed by the Debt Recovery Tribunal in the application under Section 17 of the Act of 2002 against the impugned public notice dated 11-7-2016. All orders both interim and final be passed by the Debt Recovery Tribunal in its wisdom only on merits of the case with reference to facts and law applicable. Issues Involved:1. Jurisdiction and legality of the public notice dated 11-7-2016 for e-auction and sale of immovable properties.2. Rights of the petitioner company as a sub-lessee.3. Availability and applicability of alternative remedy under Section 17 of the Act of 2002.4. Retrospective application of the amendment to Section 17 of the Act of 2002 effective 1-9-2016.Issue-wise Detailed Analysis:1. Jurisdiction and Legality of the Public Notice:The petitioner company challenged the public notice dated 11-7-2016 issued by SBI for the e-auction and sale of immovable properties of SGL under the Act of 2002 and the Rules of 2002. The petitioner argued that it is an independent juristic personality and a sub-lessee of SGL, and thus, the default of SGL should not impact its rights. The petitioner claimed that the public notice was without jurisdiction, arbitrary, and violated its rights under Article 300A of the Constitution of India.2. Rights of the Petitioner Company as a Sub-Lessee:The petitioner company stated that it had made significant investments on the sub-leased land and that the public notice for auction would dispossess it from the land, buildings, plant, and machinery, none of which were mortgaged to SBI. The respondent, SBI, contended that the petitioner company was not in legal possession of the land as the sub-lease was not properly executed or registered and was subordinate to the pre-existing equitable mortgage by SGL with SBI.3. Availability and Applicability of Alternative Remedy under Section 17 of the Act of 2002:SBI raised a preliminary objection that the petitioner company had an alternative remedy under Section 17 of the Act of 2002 and should not invoke the jurisdiction of the High Court under Article 226 of the Constitution of India. The court noted that Section 17, as amended effective 1-9-2016, allowed any 'aggrieved person' to approach the Debt Recovery Tribunal (DRT) for restoration of possession if the secured creditor's actions were found to be illegal.4. Retrospective Application of the Amendment to Section 17 of the Act of 2002 Effective 1-9-2016:The petitioner argued that the amendment to Section 17 was prospective and should not apply to its case filed before the amendment. However, the court held that the amendment was curative in nature and thus retrospective. The court cited various judgments to support the view that curative amendments are necessarily retrospective.Conclusion:The court found that the petitioner company had an alternative remedy under the amended Section 17 of the Act of 2002. The petitioner was directed to file an application before the DRT challenging the public notice dated 11-7-2016. The interim protection granted by the court would continue for three weeks from the date of the order, allowing the petitioner to seek relief from the DRT. The writ petition was disposed of with these observations.