2004 (1) TMI 379 - HC - Companies Law

Issues Involved:
1. Maintainability of the writ petition under Article 226 of the Constitution of India.
2. Interpretation and application of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
3. Rights and remedies available to the borrower under the SARFAESI Act.
4. Jurisdiction of courts and tribunals under the SARFAESI Act.

Detailed Analysis:

1. Maintainability of the Writ Petition under Article 226 of the Constitution of India:
The respondents raised a preliminary objection regarding the maintainability of the writ petition, arguing that the petitioner is not entitled to challenge any action initiated under section 13 of the SARFAESI Act unless measures have been taken under section 13(4). The petitioner countered that since no appeal under the Act can be filed against the present impugned notice/order, the constitutional remedy under Article 226 of the Constitution of India is not barred.

The court acknowledged that while constitutional remedies cannot be barred, the High Court would generally refrain from interfering with actions proposed under the Act unless there is a gross miscarriage of justice, lack of jurisdiction, or malafides. The court emphasized that the High Court should exercise discretion with due care and caution.

2. Interpretation and Application of the SARFAESI Act:
The court delved into the object, purpose, and scheme of the SARFAESI Act, which aims to regulate the securitisation and reconstruction of financial assets and enforcement of security interests. The Act allows secured creditors to enforce security interests without court intervention, particularly when dealing with non-performing assets.

Section 13(1) of the Act empowers secured creditors to enforce security interests without court intervention. Section 13(2) mandates that a notice be issued to the borrower to discharge liabilities within sixty days. If the borrower fails to comply, section 13(4) allows the secured creditor to take measures such as taking possession of secured assets or taking over their management.

3. Rights and Remedies Available to the Borrower under the SARFAESI Act:
The court noted that the Act provides a specific remedy under section 17, allowing an aggrieved person to appeal to the Debts Recovery Tribunal against measures taken under section 13(4). The court clarified that no remedy is provided for challenging actions taken before measures under section 13(4) are implemented.

Section 19 of the Act safeguards the borrower's interests, allowing for compensation and costs if the Tribunal or Appellate Tribunal finds the secured creditor's actions wrongful. The court emphasized that the borrower can file objections against the notice under section 13(2) if there are discrepancies in the demanded amount or if the borrower is not a defaulter.

4. Jurisdiction of Courts and Tribunals under the SARFAESI Act:
The court highlighted that the SARFAESI Act ousts the jurisdiction of civil courts in matters of enforcement of security interests. The Act provides a statutory remedy for borrowers through appeals to the Debts Recovery Tribunal and further to the Appellate Tribunal. The court underscored that it cannot introduce new rights or forums for appeal beyond what the statute provides.

Conclusion:
The court declined to entertain the writ petitions at this stage, emphasizing that the statutory remedies under the SARFAESI Act must be exhausted before seeking constitutional remedies. The court directed the petitioners to deposit specified amounts within a month and continue with monthly instalments, failing which the bank could proceed with legal actions for recovery.

Final Order:
The writ petitions were dismissed, subject to the petitioners' compliance with the conditions for depositing the due amounts in instalments.

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