2006 (12) TMI 229 - HC - Companies Law

Summary

Issues:
Bank's right to initiate action under NPA Act during pendency of application before DRT.

Analysis:
The judgment dealt with a case where a banker initiated proceedings against the sole proprietress of a business for defaulting on a loan. The bank had filed an application before the Debts Recovery Tribunal (DRT) in Chennai, which was pending. Meanwhile, the bank issued a notice under section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (NPA Act) along with the proviso to section 19(10) of the DRT Act. The petitioner challenged this action before the High Court.

The petitioner relied on a Division Bench judgment of the High Court, citing that the bank cannot take action under the NPA Act while the application is pending before the DRT. However, the respondent bank's counsel referred to a Supreme Court judgment where it was clarified that withdrawal of the original application before the DRT is not a prerequisite for invoking the NPA Act. The Supreme Court observed that the bank has the discretion to decide when to apply for leave to withdraw the application before the DRT, and the circumstances for such decisions are not explicitly spelled out in the law.

The High Court, considering the Supreme Court's latest pronouncement, held that there is no bar for the bank to initiate action under the NPA Act even if the original application is pending before the DRT. The Court clarified that withdrawal of the DRT application is not mandatory before invoking the NPA Act, leaving it to the bank's discretion. The petitioner was allowed to raise her plea before the Tribunal or relevant authorities for a decision based on the Act's provisions. The Court disposed of the writ petition, granting the petitioner time to move the DRT for necessary orders by a specified date.

In conclusion, the judgment clarified the bank's rights to proceed under the NPA Act despite the pendency of the application before the DRT, emphasizing the bank's discretion in deciding whether to withdraw the DRT application. The petitioner was given the opportunity to present her case before the appropriate authorities for a decision in line with the relevant legal provisions.