TaxTMI 
TaxTMI 
2024 (7) TMI 812
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....in Dubai. 3. The terms of the amended Sanction Letter dated 14th November, 2016, also contemplated creation of Personal Guarantee by the petitioner in favour of respondent no.2-bank, situated in Dubai. Thus, the petitioner had mortgaged immovable property bearing Khasra No. 4072/243, 4071/243, 4070/243 & 4069/243 situated in Golden Park Colony on Rampura Road, Village Basai Darapur ("secured asset") as security for the aforesaid loan facilities vide Declaration and Undertaking dated 06th December, 2017. Pursuant to this mortgage, the original documents for the secured asset were also handed over to the New Delhi Branch of IDBI Bank on 07th December, 2017. 4. Since the respondent no.3-company defaulted on the debt, the respondent no.1-bank enforced its security interest against the mortgaged property/secured asset under Section 13 of the SARFAESI Act. 5. Thus, pursuant to the proceedings initiated by respondent no.1-bank under the SARFAESI Act, vide CC No. 47/4, the learned CMM (West), Tis Hazari Court, vide his order dated 12th March, 2020, appointed a Receiver for taking over physical possession of the secured asset. Subsequently, by order dated 24th September, 2020, the ....
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.... laws of UAE govern it. Therefore, the respondent-banks have no authority or jurisdiction to proceed under the provisions of the SARFAESI Act. 8.5 The guarantee of the petitioner is in favour of respondent no.2-bank, situated in Dubai, and not in favour of respondent no.1-bank, situated in India. There is no debt due to the respondent no.1-bank, as per Indian Law. Therefore, the respondent no.1-bank, cannot be treated as a secured creditor under the SARFAESI Act, and is not entitled to take any action under the said Act. 8.6 Hence, the impugned orders dated 12th March, 2020 and 24th September, 2020, passed by the learned CMM (West), Tis Hazari Court, and impugned Possession Notices dated 19th March, 2020 and 03rd October, 2020, issued by the Court Receiver are null and void, illegal and bad in law. 8.7 The personal insolvency proceedings under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 ("IBC"), has been initiated by the Union Bank of India against the petitioner herein, before National Company Law Tribunal ("NCLT"), New Delhi, which is registered as Case No. IB-276/(ND)/2021. Thus, in terms of Section 96(1) of IBC, 2016, proceedings pending in respect of any....
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....("DRT"). 9.5 The moratorium would not apply in the instant case. When bank takes possession under Section 13(6) of the SARFAESI Act, the asset will vest in the bank, free from all encumbrances. 9.6 In the present case, the bank had invoked its right under Section 13(2) of the SARFAESI Act on 27th September, 2018, thereby putting the petitioner to notice that the bank reserves its right to proceed against the properties in question. The Notice of Possession under Section 13(4) of SARFAESI Act, was issued on 02nd July, 2019. Therefore, on 02nd July, 2019, in terms of the judgment of Supreme Court in the case of Transcore Versus Union of India, (2008) 1 SCC 125, all rights vested in the bank. 9.7 The actual physical possession of the property has already been taken by the bank on 17th October, 2020. The proceedings under the IBC, 2016, against the petitioner, commenced only in June, 2021. Therefore, all the actions qua the property in question, have been taken, prior to the initiation of proceedings under the IBC, 2016. Thus, no debt is being enforced against the petitioner, since the rights in the property, already stand transferred to the bank upon issuance of the notice un....
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....Line Mad 4169 x. ICICI Bank V. Classic Diamonds (India) Ltd., 2015 SCC OnLine BOM 6555 xi. M/s Classic Diamonds (I) Ltd. V. ICICI Bank Ltd., 2016 SCC OnLine Bom 15573 xii. Authorized Officer, State Bank of Travancore & Anr. V. Mathew K.C., (2018) 3 SCC 85 xiii. M.D. Frozen Foods Exports Pvt. Ltd. & Ors. V. Hero Fincorp Ltd., (2017) 16 SCC 741 xiv. Sanjay Dhingra V. IDBI Bank Ltd. & Ors., order dated 28.01.2021 in W.P.(C) 8131/2020 passed by Hon'ble Delhi High Court xv. Spentex Industries Ltd. V. State Bank of India & Anr., judgment dated 04.05.2018 in W.P.(C) No. 3474/2018 passed by Hon'ble Delhi High Court (DB) xvi. Hong Seng Energy Ltd. & Anr. V. The Authorised Officer, Canara Bank, judgment dated 29.10.2021, in S.A. No. 178/2021 and S.A. No. 203/2021, passed by Debts Recovery Tribunal-II, Chennai 10. I have heard learned counsels for the parties and have perused the record. 11. At the outset, this Court notes that Insolvency Proceedings have been initiated against the petitioner herein, in his capacity as a personal guarantor, under Section 95(1) of the IBC, 2016, by Union Bank of India, before NCLT, New Delhi.....
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.... period of fourteen days of the service of the notice of demand; and (c) relevant evidence of such default or non-repayment of debt. (5) The creditor shall also provide a copy of the application made under sub-section (1) to the debtor. (6) The application referred to in sub-section (1) shall be in such form and manner and accompanied by such fee as may be prescribed. (7) The details and documents required to be submitted under sub-section (4) shall be such as may be specified. 96. Interim-moratorium.- (1) When an application is filed under Section 94 or Section 95- (a) an interim-moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application; and (b) during the interim-moratorium period- (i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action or proceedings in respect of any debt. (2) Where the application has been made in relation to a firm, the interim-moratorium under sub-section (1)....
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....r section 100). The consequences which flow from an interim moratorium are specified in clause (b) of sub-section (1) of section 96. The impact of the interim-moratorium under section 96 is that a legal action or proceeding pending in respect of any debt is deemed to have been stayed and the creditors or the debtors shall not initiate any legal action or proceedings in respect of any debt. The crucial words which are used both in clause (b)(i) and clause (b)(ii) of sub-section (1) of section 96 are "in respect of any debt". These words indicate that the interim-moratorium which is intended to operate by the Legislature is primarily in respect of a debt as opposed to a debtor. Clause (b) of sub-section (1) indicates that the purpose of the interim-moratorium is to restrain the initiation or the continuation of legal action or proceedings against the debt. 58. This must be contra-distinguished from the provisions for moratorium which are contained in section 14 in relation to the corporate insolvency resolution process under Part II. Section 14(1)(a) provides that on the insolvency commencement date, the institution of suits or continuation of pending suits or proceedings ag....
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....he said property has still not taken place and the process under the SARFAESI Act, is still not complete. Therefore, in terms of Section 238 of the IBC, 2016, which has overriding effect over any other law, any further action by the bank, under the SARFAESI Act, is prohibited. Thus, the respondent-bank cannot continue the proceedings under the SARFAESI Act, once proceedings under the IBC, 2016, have commenced. 19. At this stage, reference may be made to the judgment of the Supreme Court in the case of Indian Overseas Bank Versus RCM Infrastructure Limited and Another 2022 SCC OnLine SC 634. In the said case, sale proceedings had already been initiated by the bank under the provisions of the SARFAESI Act and part- payment had been received by the bank prior to the commencement of the proceedings under the IBC, 2016. Subsequently, after the commencement of the proceedings under the IBC, 2016, balance payment was also received by the bank. In the said case, the Supreme Court held in categorical terms that sale was not complete upon receipt of the part-payment, and the sale could be said to be completed only upon receipt of the balance payment, which was received after the commencem....
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....templated under Rules 8 and 9 of the said Rules would stand completed only on 8-3-2019. Admittedly, this date falls much after 3-1-2019 i.e. on which date CIRP commenced and moratorium was ordered. As such, we are unable to accept the argument on behalf of the appellant Bank that the sale was complete upon receipt of the part-payment. 35. In view of the provisions of Section 14(1)(c) of the IBC, which have overriding effect over any other law, any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Sarfaesi Act is prohibited. We are of the view that the appellant Bank could not have continued the proceedings under the Sarfaesi Act once CIRP was initiated and the moratorium was ordered. xxx xxx xxx" ( Emphasis Supplied ) 22. In view of the aforesaid, it is clear that once the interim moratorium has come into play on account of the insolvency proceedings against the petitioner under the IBC, 2016, the respondent-bank cannot proceed any further in the proceedings under the SARFAESI Act with respect to the property mortgaged by the petitioner with the bank, in his ca....
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....e Code is not to allow such guarantors to escape from an independent and co-extensive liability to pay off the entire outstanding debt, which is why Section 14 is not applied to them. However, insofar as firms and individuals are concerned, guarantees are given in respect of individual debts by persons who have unlimited liability to pay them. And such guarantors may be complete strangers to the debtor - often it could be a personal friend. It is for this reason that the moratorium mentioned in Section 101 would cover such persons, as such moratorium is in relation to the debt and not the debtor. xxx xxx xxx " ( Emphasis Supplied ) 25. Now, I shall deal with the other aspect of the matter, relating to the contentions of the petitioner with respect to his objection that the provisions of the SARFAESI Act cannot be invoked by the respondent no.1-bank which is situated in New Delhi, on behalf of respondent no.2. It is the contention of the petitioner that it is respondent no.2-bank, which is situated in Dubai, which had sanctioned and disbursed loan to the respondent no.3-company. Therefore, the respondent no.1 cannot invoke provisions of the SARFAESI Act against ....
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....will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person or the statute under which the action complained of has been taken itself contains a mechanism for redressal of grievance still holds the field. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation." 99. In Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir [Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir, (2022) 5 SCC 345 : (2022) 3 SCC (Civ) 153] , it was observed as under : (SCC pp. 359-61, paras 18 & 21) "18. Even otherwise, it is required to be noted that a writ petition against the private financial institution - ARC - the appellant herein under Article 226 of the Constitution of India against the proposed action/actions under Section 13(4) of the SARFAESI Act can be said to be not maintainable. In the present case, the ARC proposed to take action/actions under the SARFAESI Act to recover the borrowed amount as a secured creditor. The ARC as such cannot be said to be performing public functions which are normall....
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....r mechanically and without assigning any reasons. The High Court ought to have appreciated that by passing such an interim order, the rights of the secured creditor to recover the amount due and payable have been seriously prejudiced. The secured creditor and/or its assignor have a right to recover the amount due and payable to it from the borrowers. The stay granted by the High Court would have serious adverse impact on the financial health of the secured creditor/assignor. Therefore, the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters. In these circumstances, the proceedings before the High Court deserve to be dismissed." xxx xxx xxx" ( Emphasis Supplied ) 28. Similarly, in the case of United Bank of India Versus Satyawati Tondon and Others (2010) 8 SCC 110, Supreme Court, has held as follows: "xxx xxx xxx 5. An analysis of the provisions of the DRT Act shows that primary object of that Act was to facilitate creation of special machinery for speedy recovery of the dues of banks and financial institutions. This is the reason why the DRT Act not only provides for es....
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....hts conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self-imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution. 45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance. xxx xxx xxx 55. It is a matter of serious concern that despite repeated pronouncement of this Court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the Sarfaesi Act and exercise jurisdiction under Article 226 for passing orders which have serious adverse impact on the right of banks and other....
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....es. It is only where statutory remedies are entirely ill-suited to meet the demands of extraordinary situations, for instance where the very vires of the statute is in question or where private or public wrongs are so inextricably mixed up, and the prevention of public injury and the vindication of public justice require it then recourse may be had to Article 226 of the Constitution. It is not pointed out by the Petitioner how the statutory remedy available is ill-suited, or there is any public wrong and public injury element mixed up. 13. The Respondents contend that the mortgaged property is in India, the mortgage deed is executed in India and that the contention of the Petitioner that this transaction is governed by the laws of Hong Kong and nothing has taken place in India is not an admitted position. These issues will have to be decided by the Tribunal. Furthermore, the Tribunal has the power to rule on its jurisdiction. If the Tribunal holds it has no jurisdiction, the Petitioner has remedies. The contentions of the Petitioner can be raised before the Tribunal. The Petitioner has filed an application in the Tribunal, which is pending. Therefore, on the ground of avai....