Court dismisses appeal challenging SARFAESI order on secured assets sale, emphasizes creditor rights

The court dismissed the appeal challenging an order directing the Official Liquidator to hand over secured assets for sale under the SARFAESI Act. It found the SARFAESI proceedings were not time-barred, applying a 30-year limitation period for foreclosure. Emphasizing DRT jurisdiction over SARFAESI matters, the court highlighted secured creditors' rights but ruled the ex-Director's appeal as non-maintainable per precedent. The appeal was dismissed due to lack of jurisdiction and the ex-Director's non-maintainability.

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Issues Involved:
1. Exemption application.
2. Condonation of delay in filing the appeal.
3. Maintainability of the appeal under Section 483 of the Companies Act, 1956.
4. Validity of SARFAESI proceedings.
5. Jurisdiction of the Company Court and DRT.
6. Limitation period for SARFAESI proceedings.
7. Role and rights of secured creditors and the Official Liquidator.
8. Maintainability of the appeal by the ex-Director.

Detailed Analysis:

Exemption Application:
1. The application for exemption (CM No.18563/2020) was allowed subject to just exceptions and as per extant rules, and the application was disposed of.

Condonation of Delay:
2. The appeal was filed with a condonation of delay of 114 days (CM No.18562/2020). The court proceeded to hear the appeal despite the delay.

Maintainability of the Appeal:
3. The appeal under Section 483 of the Companies Act, 1956, read with Rule 9 of the Companies (Court) Rules, 1959, challenged the order dated 13th March 2020 of the Company Court. The order directed the Official Liquidator to hand over possession of secured assets to RIICO Ltd. and permitted RIICO Ltd. to sell the assets under the SARFAESI Act.

Validity of SARFAESI Proceedings:
4. The appellant contended that the SARFAESI proceedings initiated by RIICO Ltd. were time-barred. The appellant argued that the money became due on 31st December 1991, and the 12-year limitation period expired before the notice under Section 13(2) of the SARFAESI Act was issued on 20th July 2015.

Jurisdiction of the Company Court and DRT:
5. The court questioned whether the Company Court had jurisdiction to address the limitation issue for SARFAESI proceedings or if it should be addressed by the DRT under Section 17 of the SARFAESI Act. The court noted that the SARFAESI Act has an overriding effect over other laws and that the jurisdiction for such matters lies with the DRT.

Limitation Period for SARFAESI Proceedings:
6. The court found that Article 63(a) of the Limitation Act, which provides a 30-year limitation period for foreclosure of mortgage, was applicable rather than Article 62, which provides a 12-year limitation for payment of money secured by a mortgage.

Role and Rights of Secured Creditors and the Official Liquidator:
7. The court highlighted that secured creditors, like RIICO Ltd., can stay outside the winding-up process and realize their security without the leave of the winding-up court. However, they must ensure the distribution of sale proceeds in accordance with Sections 529 and 529A of the Companies Act, which prioritize workmen’s dues.

Maintainability of the Appeal by the Ex-Director:
8. The court noted that the appeal was filed by the ex-Director of the company in liquidation. It referenced a previous order and the Supreme Court ruling in Innoventive Industries Ltd. Vs. ICICI Bank, which held that appeals by erstwhile directors of a company in insolvency are not maintainable.

Conclusion:
24. The court dismissed the appeal, finding no merit due to lack of jurisdiction and the non-maintainability of the appeal by the ex-Director.

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