2005 (12) TMI 285 - HC - Companies Law

Summary

Issues Involved:
1. Enforcement of security interest by a secured creditor under section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, after obtaining a recovery certificate from the Debts Recovery Tribunal.
2. Status of a "borrower" under the Act after an order by the Debts Recovery Tribunal.
3. Jurisdiction of a Chief Judicial Magistrate in a non-Metropolitan area under section 14 of the Act to take possession of the secured asset.

Issue-wise Detailed Analysis:

1. Enforcement of Security Interest Post-Recovery Certificate:
The court examined whether a secured creditor can invoke section 13 of the Securitisation Act after obtaining a recovery certificate from the Debts Recovery Tribunal (DRT). The petitioner argued that the bank should recover the debt through the sale of the property as per the recovery certificate, and section 13 should not apply since the petitioner ceased to be a borrower once the DRT passed the final order. However, the court concluded that section 13 allows a secured creditor to enforce any security interest without court or tribunal intervention. The court emphasized that the Act's provisions are in addition to and not in derogation of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act). Hence, the bank is not precluded from invoking section 13 despite having a recovery certificate.

2. Status of "Borrower" Post-DRT Order:
The petitioner contended that he ceased to be a borrower once the DRT passed an order under section 19 of the RDDB Act, thus the bank could not proceed under the Securitisation Act. The court rejected this argument, stating that the definition of "borrower" under the Act includes any person who has been granted financial assistance and has not discharged their debt. The court clarified that the Act's provisions do not imply that a person ceases to be a borrower upon the DRT's order. Therefore, the bank is entitled to proceed against the petitioner under the Act.

3. Jurisdiction of Chief Judicial Magistrate:
The petitioner argued that the Chief Judicial Magistrate (CJM) in a non-Metropolitan area is not empowered under section 14 of the Act to take possession of the secured asset. The court clarified that a CJM in a non-Metropolitan area has the same powers as a Chief Metropolitan Magistrate in a Metropolitan area. Thus, the CJM, Ernakulam, is entitled to exercise the powers under section 14 of the Act. The court dismissed the petitioner's contention and upheld the CJM's jurisdiction to entertain the bank's application for possession of the secured asset.

Conclusion:
The court found no illegality or irregularity in the impugned order passed by the CJM. It affirmed that a secured creditor can enforce security interest under section 13 of the Act even after obtaining a recovery certificate from the DRT. The petitioner remains a borrower under the Act despite the DRT's order, and the CJM in a non-Metropolitan area has jurisdiction under section 14 of the Act. The petition was accordingly dismissed.