2004 (5) TMI 316 - HC - Companies Law

Summary

Issues:
1. Validity of notice issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
2. Permissibility of availing multiple remedies simultaneously.
3. Maintainability of the writ petition in light of recent Supreme Court decision.
4. Allegation of fraud and bias in the proceedings.

Validity of Notice under the Act:
The petitioner challenged a notice issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, demanding payment of a specific amount within sixty days. The petitioner argued that since the debt matter was pending before the Debt Recovery Tribunal, availing remedies under the Act simultaneously was impermissible. Citing the Supreme Court decision in Andhra Pradesh State Financial Corpn. v. Gar Re-Rolling Mills AIR 1994 SC 2151, the petitioner contended against the validity of the notice.

Permissibility of Availing Multiple Remedies:
The bank's counsel raised a preliminary objection regarding the maintainability of the writ petition, referring to the recent Supreme Court decision in Mardia Chemicals Ltd. v. Union of India [2004] 120 Comp. Cas. 373. The counsel argued that the petitioner could challenge the notice by filing a show cause before the creditor and subsequently appeal to the Debt Recovery Tribunal. The guidelines laid down by the Supreme Court in paragraph 80 of the judgment provided a framework for the creditor-debtor proceedings, allowing for a structured approach to address grievances.

Maintainability of the Writ Petition:
In response to the bank's arguments, the petitioner's counsel contended that the principles established by the Supreme Court might not be directly applicable due to allegations of fraud and bias. The petitioner expressed concerns about approaching the creditor for redressal, fearing bias due to collusion between the creditor and the principal borrower. However, the court found that the petitioner, as per the Supreme Court guidelines, should first address the creditor with all legal objections before seeking recourse at the Tribunal.

Allegation of Fraud and Bias:
While acknowledging the petitioner's concerns regarding potential bias, the court emphasized adherence to the guidelines set by the Supreme Court. The petitioner was directed to raise all legal questions before the creditor, who was mandated to provide a reasoned response addressing each objection. If still dissatisfied, the petitioner retained the right to appeal to the Tribunal. Ultimately, the court dismissed the writ petition, citing the availability of remedies before the Tribunal and the necessity to follow the prescribed procedure outlined by the Supreme Court.

This detailed analysis covers the validity of the notice, permissibility of availing multiple remedies, maintainability of the writ petition, and the handling of fraud allegations in the context of the judgment delivered by the High Court of Patna.