2004 (2) TMI 359 - HC - Companies Law

Summary

Issues:
Challenge to validity of notice under Securitisation Act, applicability of Securitisation Act over Recovery of Debts Act, authority to fix instalments or grant one-time settlement, limitations on exercise of power under article 226.

Validity of Notice under Securitisation Act:
The petitioner challenged the notice issued by the Bank under section 13(2) of the Securitisation Act. The Court noted that the Act had been upheld in a previous Division Bench decision and agreed with the view taken. The petitioner's argument that the Bank's action was not valid due to filing of an application before the Debt Recovery Tribunal was dismissed. The Court emphasized that the Securitisation Act provides an additional remedy for debt recovery, which can coexist with other laws. Citing a Supreme Court decision, the Court affirmed that an Act can indeed provide an additional remedy.

Applicability of Securitisation Act over Recovery of Debts Act:
The Court addressed the argument that no action could be taken under the Securitisation Act as the Bank had filed an application before the Debt Recovery Tribunal. The Court held that the Securitisation Act is a special law that will override general laws like the Recovery of Debts Due to Banks and Financial Institutions Act. It was emphasized that the Securitisation Act offers an additional avenue for debt recovery, distinct from other existing laws.

Authority to Fix Instalments or Grant One-Time Settlement:
The petitioner requested the Court to intervene and direct the fixing of instalments or grant a one-time settlement. The Court clarified that such decisions regarding loan rescheduling fall within the purview of the Financial Institution or Bank that granted the loan. The Court stated that it does not have the authority to make decisions regarding instalments or settlements, as it would essentially entail re-scheduling the loan.

Limitations on Exercise of Power under Article 226:
The Court highlighted the well-settled limitations on its power under article 226. It stated that the Court can only interfere if there is a violation of law or an error of law apparent on the record. In this case, the Court found no such violation or error, leading to the dismissal of the petition. The Court emphasized the importance of self-restraint in exercising its power under article 226, intervening only in cases of legal violations or errors.

In conclusion, the High Court of Allahabad upheld the validity of the notice issued under the Securitisation Act, clarified the Act's precedence over general debt recovery laws, affirmed the authority of financial institutions to decide on instalments or settlements, and emphasized the limitations on the Court's power under article 226. The petition challenging the notice was dismissed based on the absence of any legal violations or errors.