2005 (7) TMI 358 - HC - Companies Law

Issues Involved:
1. Constitutional validity of the Securitisation Act.
2. Challenge to notice under section 13(2) of the Securitisation Act.
3. Action under section 13(4) of the Securitisation Act.
4. Fee for filing application under section 17 of the Securitisation Act.
5. Application of the proviso to section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
6. Objections under section 22 of the Sick Industrial Companies Act or other statutory provisions.

Issue-wise Detailed Analysis:

1. Constitutional validity of the Securitisation Act:
The court upheld the constitutional validity of the Securitisation Act, referencing the Supreme Court's decision in Mardia Chemicals Ltd. v. Union of India, which validated the Act except for section 17(2). The Supreme Court found that the Act aimed to achieve speedier recovery of dues declared as NPAs, thus serving public interest and economic growth. The challenge to the Act's validity was rejected as it had already been upheld by the Supreme Court.

2. Challenge to notice under section 13(2) of the Securitisation Act:
The court emphasized that a notice under section 13(2) serves as a show-cause notice. The borrower can raise objections to this notice, which the secured creditor must consider and respond to with reasons if the objections are overruled. The court dismissed the writ petitions challenging section 13(2) notices as premature, as the borrowers have the alternative remedy of replying to the notice. The secured creditor must decide on the objections by a reasoned order and communicate the rejection to the borrower.

3. Action under section 13(4) of the Securitisation Act:
For actions taken under section 13(4), the court highlighted the alternative remedy of filing an application under section 17 before the Debts Recovery Tribunal (DRT). The writ petitions challenging section 13(4) actions were dismissed on the ground of alternative remedy. However, the court allowed the filing of applications under section 17 within one month from the date of the judgment, treating them as within limitation if filed within this period.

4. Fee for filing application under section 17 of the Securitisation Act:
The court rejected the challenge to the fee prescribed for filing an application under section 17, stating that section 17(1) itself contemplates such a fee. The fee structure, as prescribed by the rules, was found to be reasonable and not arbitrary. The court also noted that ad valorem fees are not unknown in the legal system and upheld the prescribed fees as valid.

5. Application of the proviso to section 19(1) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993:
The court interpreted the proviso to section 19(1) to mean that if a notice under section 13(2) of the Securitisation Act had been issued before 11-11-2004, there is no need to seek permission from the DRT to withdraw an application pending before it. However, if the notice is issued after 11-11-2004, permission from the DRT is required before taking action under the Securitisation Act. The court emphasized that statutory notices under section 13(2) are actions taken under the Securitisation Act.

6. Objections under section 22 of the Sick Industrial Companies Act or other statutory provisions:
The court allowed that objections under section 22 of the Sick Industrial Companies Act or other statutory provisions could be raised in reply to the notice under section 13(2) or in the application under section 17. However, such objections would not be entertained directly by the court without availing of these alternative remedies.

Summary of Conclusions:
1. The constitutional validity of the Securitisation Act is upheld.
2. Challenges to notices under section 13(2) are dismissed due to the alternative remedy of replying to the notice.
3. Challenges to actions under section 13(4) are dismissed due to the alternative remedy of filing an application under section 17.
4. The fee for filing an application under section 17 is upheld as valid.
5. Applications under section 17 related to the writ petitions can be filed within one month and will be considered within limitation.
6. Objections under other statutory provisions can be raised in replies to section 13(2) notices or in section 17 applications but not directly in court without using alternative remedies.

Disposition:
All writ petitions are dismissed, and all connected miscellaneous petitions are closed. Interim orders are vacated.

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