TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 812
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....ction 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 learned CMM (West), Tis Hazari Court, extended t....
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....o 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 debt, shall be deemed to have been stayed. 8.8 No other alternativ....
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....AESI 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 under Section 13(4) of the SARFAESI Act. 9.8 Invocation of personal guarantee against the petitioner has nothing to do with the imp....
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.... 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. Thus, the interim moratorium in terms of Section 96 of the IBC, 2016, is in force. The order dated 21st December, 2023 passed by the NCLT, New Delhi in this regard, reads as under: "This application has been filed under Section 95(1) of IBC, 2016 seekin....
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....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) shall operate against all the partners of the firm as on the date of the application. (3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator." 13. The aforesaid Sections 95 and 96 are contained in Part III of IBC, 2016, which deals with the insolvency re....
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....ial 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 against the corporate debtor, including proceedings in execution shall stand prohibited by an order of the Adjudicating Authority. Clause (b) of sub-section (1) of section 14 empowers the Adjudicating Authority to declare a moratorium restraining the transfer, encumbrance, alienation or disposal by the corporate debtor of any of its assets or any legal right or beneficial interest therein. Significantly, th....
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.... 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 commencement of the proceedings under the IBC, 2016. Thus, the Supreme Court held that after the moratorium had come into place, the bank could not have continued with the proceedings under the SARFAESI Act and could not have accepted the balance payment after the commencement of the moratorium. Therefore, even in a case where the bank had already commenced the sale process, prior to the commencement of the proceedings un....
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....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 capacity as a personal guarantor. 23. Considering the detailed discussion herein above, this Court rejects the contention of the respondent-bank that the Personal Insolvency Proceedings against the petitioner, who is a guarantor, would not come in the way of enforcement of rights under the SARFAESI Act. The judgment of Kerala High Court in the case of Jeny Thankachan (supra), relied upon by the respondent, was passed by relying upon the judgment in the case of St....
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....ntioned 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 the property of the petitioner, as there is no debt due to the respondent under Indian Law. Debt, if any, due to the respondent no.2, would be in terms of the laws of UAE. Whereas, the respondent-bank has controverted the said submissions raised by the petitioner. 26. Law in this regard is well settled that any person who has a grievance against any notice issued under Section 13(4) of the SARFAESI Act, or action taken under Section 14 of SARFAESI Act, can apply to the DRT under Section 17(1) of t....
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....td. 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 normally expected to be performed by the State authorities. During the course of a commercial transaction and under the contract, the bank/ARC lent the money to the borrowers herein and therefore the said activity of the bank/ARC cannot be said to be as performing a public function which is normally expected to be performed by the State authorities. If proceedings are initiated under the SARFAESI Act and/or any proposed action is to be taken and the borrower is aggrieved by any of the actions of the private bank/bank/ARC, borrower has to....
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....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 establishment of the Tribunals and the Appellate Tribunals with the jurisdiction, powers and authority to make summary adjudication of applications made by banks or financial institutions and specifies the modes of recovery of the amount determined by the Tribunal or the Appellate Tribunal but also bars the jurisdiction of all courts except the Supreme Court and the High Courts in relation to the matters specified in Section 17. The Tribunals and the Appellate Tribunals have also been freed from the shackles of procedure contained in the Code of Civil Procedure. 6. To put it d....
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....im 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 financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection. xxx xxx xxx" ( Emphasis Supplied ) 29. Considering the law as discussed in the preceding paragraphs, it is no longer res integra that where a remedy is available under Section 17 of the SARFAESI Act, this Court ought not to entertain writ petitions under Article 226 of the Constitution of India. 30. This Court further notes that similar issues, as raised by the petitioner herein, came to be adjudicated by the Division Bench of....