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Issues: (i) whether arbitration proceedings and proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 can proceed simultaneously; (ii) whether the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 can be invoked in relation to a debt and security created before the respondent was notified as a financial institution, and whether the fact that the account became a non-performing asset before such notification bars recourse to the Act.
Issue (i): whether arbitration proceedings and proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 can proceed simultaneously.
Analysis: The statutory scheme treats the recovery mechanism under the Act as cumulative and in addition to other remedies. The Act gives overriding effect by Section 35 and expressly preserves the operation of other laws by Section 37. The reasoning accepted that arbitration is an alternative adjudicatory forum, while proceedings under the Act are enforcement proceedings for security interest. The doctrine of election was held inapplicable because the remedies are not repugnant or inconsistent.
Conclusion: Yes. Arbitration proceedings and proceedings under the Act can go hand in hand.
Issue (ii): whether the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 can be invoked in relation to a debt and security created before the respondent was notified as a financial institution, and whether the fact that the account became a non-performing asset before such notification bars recourse to the Act.
Analysis: The Court treated the Act as providing a procedural mechanism for enforcement of an existing security interest and not as creating a new substantive liability. The relevant point was whether a live actionable debt and security interest existed when the Act became applicable to the respondent. Once the notification brought the respondent within the statutory definition of a financial institution, the right to proceed under the Act accrued for existing debts that were still alive. The earlier creation of the mortgage and the prior classification of the account as a non-performing asset did not make the application of the Act retrospective in the prohibited sense.
Conclusion: Yes. The Act could be invoked for existing and live debts despite the prior creation of the security and the earlier declaration of the account as an NPA.
Final Conclusion: The appeal failed in full, and the respondent was held entitled to pursue remedies under the Act notwithstanding the pending arbitration.
Ratio Decidendi: Proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 are cumulative enforcement remedies, available alongside arbitration, and the Act may be applied prospectively to existing live debts and security interests once the creditor is brought within its statutory coverage.
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