2005 (1) TMI 417 - HC - Companies Law

Summary

Issues:
Challenge to notices under Securitisation Act based on limitation period.

Analysis:
The appeals contested a judgment dismissing petitions challenging notices by a bank under section 13(2) of the Securitisation Act. The bank issued notices for recovery against two sister companies for specific amounts, based on consent decrees from suits filed in 1992. The petitioners argued that the notices were beyond the limitation period, rendering them void. However, the single Judge ruled that the notices were within the 12-year limitation period under the Limitation Act, starting from the date of the consent decrees in 1992.

The main contention raised was regarding the limitation period under the Securitisation Act. The appellants argued that the notices were issued after the expiration of the 12-year limitation period from the date the mortgage deeds were executed. However, the court clarified that the limitation period starts from the date of the consent decrees in 1992, not the date of the mortgage deeds. As the notices were issued within 12 years from the decree date, they were deemed valid under the law.

The court highlighted the difference between proceedings under the Civil Procedure Code and the Securitisation Act. The Act allows financial institutions to enforce security without court intervention, subject to specific procedures. The Act provides for enforcement measures after notifying the borrower, with a right of appeal before the Debts Recovery Tribunal. The issuance of notices under the Act is considered part of executing a decree, not initiating a new suit in a civil court.

Furthermore, the court emphasized that the decrees passed by the board of nominees in 1992 fell under the definitions of "property" and "financial asset" in the Securitisation Act. The limitation period for enforcement of such decrees was 12 years from the date of default in payment under the decree, as per Article 136 of the Limitation Act. Consequently, the impugned notices were deemed to be within the statutory limitation period, leading to the dismissal of the appeals and related civil applications.

In conclusion, the court upheld the validity of the notices issued by the bank under the Securitisation Act, ruling that they were within the prescribed limitation period as per the relevant legal provisions.