TaxTMI 
TaxTMI 
2010 (6) TMI 326
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....ry to produce quality yarn and to export cotton yarn manufactured by them to the other countries. The DPG was for 19,000,000 Austrian shillings, which is equivalent to Indian currency of Rs. 6,04,13,421 on January 28, 1998. Having availed of the DPG facility, the third respondent has mortgaged the immovable properties at Nallati-palayam Village, Pollachi Taluk, by depositing the title deeds relating to the property on January 24, 1998. As per the terms of DPG, the petitioner was bound to honour its commitments and therefore, made the payment to foreign bank, but, neither the third respondent nor the directors/guarantors have come forward to pay the debt outstanding for over four years. As payment was not forthcoming and the third respondent also failed to pay the accrued interest, the petitioner was constrained to classify the account as a non-performing asset (NPA) as per the guidelines of the Reserve Bank of India and the account was marked for recovery. Hence, a notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("the SARFAESI Act") was issued by the petitioner-bank on November 22, 2003, to the t....
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....ompleting the formalities as required under the provisions of the SARFAESI Act, the petitioner took possession of the unit on December 5, 2005, in the presence of a notary public and locked factory buildings and all the doors including the main door and posted the security staff to guard the premises. Subsequently, the authorised officer of the petitioner-bank got the message that the management of the third respondent, by using force, drove the security staff posted by them out of the premises and broke open the locks. Immediately, the petitioner bank lodged a police complaint and approached the District Collector to render assistance; to the petitioner to take possession of the unit by exercising the powers conferred on them under section 14 of the SARFAESI Act. But the District Collector, instead of providing assistance, after hearing the third respondent, sent his reply dated March 27, 2006, stating that they should not interfere with the matter in view of the pendency of the proceedings before the DRT, Coimbatore. Hence, the petitioner was constrained to file W.P. No. 12903 of 2006 to quash the order dated March 27, 2006, of the District Magistrate and to direct the District C....
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.... DRAT granted an ex parte interim stay of the order of the DRT and diluted the order by reducing the deposit amount to Rs. 2 crores within 3 months. 5. In the meantime, on December 19, 2006, an order was passed by the BIFR in the reference submitted by the third respondent-company stating that the reference filed under section 15(1) of the SICA had abated since the petitioner-bank had already initiated action under section 13(4) of the SARFAESI Act. Aggrieved over the same, the third respondent-company had filed an appeal before the first respondent Appellate Authority for Industrial and Financial Reconstruction (AAIFR) to set aside the order passed by the BIFR, but the first respondent, by its order dated September 25, 2007, set aside the said order of the BIFR on a finding that the action of the bank had been stayed by the DRAT in the appeal filed by the third respondent and hence, there cannot be any effective action under section 13(4) of the SARFAESI Act; therefore, the order of abatement would not be justified and thus, the first respondent appellate authority directed the BIFR to take further necessary action in the reference filed by the third respondent-company, accordi....
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....e action already taken by the bank under section 13(4) of the SARFAESI Act. Under such circumstances, the impugned order passed by the AAIFR is not legally sustainable and hence, it is liable to be set aside. 7. Per contra, learned senior counsel for respondent Nos. 3 and 4 made elaborate arguments and submitted that the stay granted in M. A. No. 56 of 2006 would amount to stay of all proceedings under section 13(4) of the SARFAESI Act and under such circumstances, no error could be found in the order passed by the DRAT and if the appeal is dismissed by the DRAT, the third respondent would be put to irreparable loss and hardship. 8. Heard learned senior counsel for both sides and perused the materials available on record. 9. In view of the submissions made by learned senior counsel on either side, I am of the view that the scope of the writ petition has become narrow and that the question that arises for consideration is, whether the stay granted by the DRAT in M. A. No. 56 of 2006 as against the order passed in I. A. No. 538 of 2005 by the DRT, Coimbatore, would amount to nullify or invalidate the action that had already been taken by the petitioner-bank under section 13(....
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....ction under section 13(4) was taken before a stay was obtained. In our opinion not so. This is because of two reasons : (i) a stay can be obtained obviously only after an order is passed. (ii) stay means that the stayed order is not operative. This implied that till such time as the stay is lifted there is no effective action under section 13(4) of the SARFAESI Act. In this event abatement will not be justified." 12. Provisos (i ) to (iii) to section 15(1) read thus : "15. Reference to Board.-(1) Where an industrial company has become a sick industrial company, the board of directors of the company shall, within sixty days from the date of finalisation of the duly audited accounts of the company for the financial year as at the end of which the company has become a sick industrial company, make a reference to the Board for determination of the measures which shall be adopted with respect to the company : Provided that if the board of directors had sufficient reasons even before such finalisation to form the opinion that the company had become a sick industrial company/the board of directors shall, within sixty days after it has formed such opinion, make a reference t....