Simultaneous proceedings under SARFAESI Act and RDDB Act allowed as both laws are complementary

The Delhi HC dismissed a petition challenging simultaneous proceedings under SARFAESI Act and RDDB Act. The court held that both Acts are complementary, not inconsistent, following the SC precedent in Transcore v. Union of India. The respondent could continue adjudicatory proceedings under Section 19 of RDDB Act alongside SARFAESI enforcement proceedings. The court found the petition was filed in bad faith to circumvent recovery proceedings where petitioners were liable to pay Rs. 2,74,31,840.37 plus interest, and to avoid statutory appeal provisions.

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Issues Involved:
1. Maintainability of the writ petition in light of the availability of statutory remedy of appeal under Section 20 of the RDDB Act.
2. Whether the recovery proceedings initiated under the RDDB Act can be continued along with proceedings under the SARFAESI Act simultaneously.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The Respondent raised a preliminary objection to the maintainability of the writ petition, arguing that the Petitioners have the statutory remedy of appeal under Section 20 of the RDDB Act, which they have not availed. The Respondent contended that the Petitioners approached the Court with "unclean hands" by flouting the CMM's order and interfering with the possession of the secured asset. In response, the Petitioners argued that the appeal under Section 20 is not efficacious due to the statutory mandate of pre-deposit and that the grounds raised in the writ petition justify an exception for its maintainability.

2. Simultaneous Proceedings under RDDB Act and SARFAESI Act:
The Petitioners contended that once the SARFAESI Act proceedings were invoked, the Respondent was precluded from pursuing the RDDB Act proceedings simultaneously. They relied on the Supreme Court judgment in Transcore v. Union of India and Another (2008) to argue that there should not be multiplicity of proceedings. The Petitioners argued that the DRT was precluded from entertaining the RDDB Act application due to the pending SARFAESI Act proceedings, and this multiplicity of proceedings was prejudicial to them.

Court's Analysis and Judgment:

On Maintainability:
The Court noted that the Petitioners had not availed the statutory remedy of appeal under Section 20 of the RDDB Act against the DRT's order dated 20th January 2024. The Court emphasized that the Supreme Court in ITC Ltd v. Blue Coast Hotels Ltd held that a debtor who has failed to discharge its liabilities is not entitled to discretionary equitable relief under Article 226 of the Constitution. Therefore, the Court found the filing of the writ petition to be not bona fide and aimed at overreaching the recovery proceedings.

On Simultaneous Proceedings:
The Court referred to authoritative judgments by the Supreme Court, including Transcore v. Union of India, Mathew Varghese v. M. Amritha Kumar, and M.D. Frozen Foods Exports Pvt. Ltd. v. Hero Fincorp Ltd., which settled that the RDDB Act and SARFAESI Act are complementary to each other and not mutually exclusive. The Supreme Court held that the provisions of the RDDB Act are not inconsistent with those of the SARFAESI Act, and both Acts can be applied simultaneously. The Court quoted significant excerpts from these judgments to reinforce that the doctrine of election does not apply as there is no inconsistency between the remedies provided by both Acts.

The Court concluded that the continuation of the adjudicatory proceedings under the RDDB Act was maintainable despite the invocation of the SARFAESI Act proceedings. The SARFAESI Act proceedings are in the nature of enforcement proceedings, while the RDDB Act proceedings are adjudicatory. Therefore, the simultaneous continuation of both proceedings is permissible and not prejudicial.

Conclusion:
The Court dismissed the writ petition along with pending applications, holding that the petition was without merit and filed to circumvent the statutory appeal provisions. The legal position is clear that the RDDB Act and SARFAESI Act can operate concurrently, and the Petitioners' arguments against this were unfounded.

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