2004 (8) TMI 410 - HC - Companies Law

Summary

Issues:
1. Invocation of SARFAESI Act by the bank despite proceedings before DRT.
2. Legal validity of invoking SARFAESI Act in the present case.

Issue 1:
The petitioner, a hotel proprietor, approached Indian Overseas Bank for a term loan and cash credit facility, creating an equitable mortgage. The bank initiated action under the SARFAESI Act, demanding full loan repayment within 60 days despite proceedings before the Debts Recovery Tribunal (DRT). The petitioner argued that invoking SARFAESI Act after initiating recovery under the Recovery Act was impermissible. The petitioner relied on a Full Bench judgment to support the claim that SARFAESI Act cannot be invoked after seeking remedies under the Recovery Act.

Issue 2:
The court analyzed the legality of invoking SARFAESI Act in the present case. The judge noted that SARFAESI Act was enacted to enforce security interests of lending banks, empowering them to recover loan amounts efficiently. Referring to a Supreme Court judgment, the court upheld the provisions of SARFAESI Act, emphasizing the need for faster recovery of Non-Performing Assets (NPAs). The court highlighted that issuing a notice under section 13(2) of the SARFAESI Act is a legal requirement, and it does not bar the bank from proceeding under the Act even if there are pending proceedings before the DRT. The court dismissed the petitioner's argument that the Recovery Act controls SARFAESI Act, stating that the provisions of SARFAESI Act prevail over inconsistent laws. Additionally, the court distinguished a Full Bench judgment related to State Financial Corporations Act, clarifying that SARFAESI Act does not contain multiple recovery methods like the State Financial Corporations Act, making the bank's action permissible in the present case.

In conclusion, the court dismissed the writ petition, affirming the bank's right to invoke the SARFAESI Act despite ongoing proceedings before the DRT, emphasizing the Act's efficacy in expeditious recovery of debts and enforcement of security interests.