2004 (6) TMI 333 - HC - Companies Law

Summary

Issues:
Validity of action under sub-section (3) of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Analysis:
The judgment in question revolves around the validity of the action taken under sub-section (3) of section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The petitioner argued that the action by respondent No. 1 was not sustainable as the objection raised by the petitioner was not considered, no reasoned order was passed, and the decision was not communicated, citing the precedent set by the Apex Court in Mardia Chemicals Ltd. v. Union of India [2004] 51 SCL 513. The respondent did not dispute the lack of a reasoned order but mentioned that due to the petitioner's court approach, no action was taken under sub-section (4) of section 13. The respondent agreed to reconsider the objection following the procedure laid down by the Apex Court.

The judgment analyzed the contentions presented by both counsels and referred to the observations of the Apex Court in Paragraph 80 of the judgment. It highlighted the necessity for the secured creditor to consider objections raised by the borrower with due application of mind and communicate reasons for not accepting them, as per the provisions of the Act. The judgment emphasized the importance of communicating the decision to the borrower and the right to approach the Debt Recovery Tribunal under specific circumstances. It concluded that the petitioner's objection was not considered, no reasoned order was passed, and the decision was not communicated, preventing any action under sub-section (4) of section 13 from being taken against the petitioner.

Based on the law laid down by the Apex Court, the judgment directed respondent No. 1 to reconsider the petitioner's objection submitted to the show-cause notice, ensuring that any rejection is supported by a reasoned order and the grounds for rejection are communicated to the petitioner. The Rule was made absolute with the mentioned directions, and no costs were awarded in the case.