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2007 (2) TMI 321 - HC - Companies Law

Issues Involved:
The legality and validity of notices issued by the appellant-Bank under the SARFAESI Act. Compliance with section 13(3A) of the SARFAESI Act.

Legality and Validity of Notices under SARFAESI Act:
The appellant had sanctioned financial assistance to the respondent for setting up a new unit. Due to default in repayment, the appellant filed a recovery application before DRT and also took possession of secured assets u/s 13(4) of the SARFAESI Act. The Writ Petition challenged the notices issued under sections 13(2) and 13(4) as contrary to the SARFAESI Act. The Single Judge held the notices illegal based on a previous case. However, the High Court ruled that withdrawal of the application before DRT is not mandatory u/s the SARFAESI Act, citing a Supreme Court decision. The appellant was allowed to proceed under the SARFAESI Act without withdrawing the DRT application.

Compliance with Section 13(3A) of the SARFAESI Act:
The respondent claimed non-compliance with section 13(3A) of the SARFAESI Act. The respondent argued that the possession notice u/s 13(4) was issued before communicating the reasons for non-acceptance of objections raised. The High Court explained that section 13(3A) requires the secured creditor to consider objections raised by the borrower and communicate reasons for non-acceptance within a week. The Court emphasized the importance of transparency and fair play in implementing the SARFAESI Act. It was concluded that the appellant had substantially complied with section 13(3A) requirements. The Court dismissed the Writ Petition, allowing the appellant to proceed under the SARFAESI Act, with the borrower retaining the right to approach the DRT under section 17 if desired.

 

 

 

 

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