2010 (3) TMI 679 - HC - Companies Law

Legality and propriety of the notice dated 5th January, 2010, issued by the Tahsildar, Palghar, District Thane, informing the petitioners to handover possession of the immovable and movable properties to respondent No. 2 the Asset Reconstruction Company Ltd. ( ARCIL ), within 15 days from the date of the notice challenged Held that - Pursuant to the order from the District Magistrate, Thane, the Tahsildar concerned sent a communication dated 5th January, 2010 to the petitioners informing them to hand-over possession of the property in question so as to enable him to hand-over the same to respondent No. 2, the lawful assignee of respondent No. 1. The order and the communication sought to be impugned herein are nothing but an assistance sought by the secured creditor from the legal authorities in accordance with law to enforce the security interest. In other words, it is a help provided by the lawful authority by a non-adjudicatory process, as contemplated under section 14 of the Act. There is nothing unconstitutional or contrary to law in the impugned order and the communication nor they are violative of the provisions of the Constitution of India. W.P. dismissed.

Issues Involved:
1. Legality and propriety of the notice dated 5th January, 2010, issued by the Tahsildar, Palghar, District Thane.
2. Validity of the order dated 24th August, 2009, passed by the District Magistrate, Thane.
3. Compliance with the procedure laid down in section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('the Act').
4. Right to appeal under section 17 of the Act.
5. Assignment of debt to a third party.
6. Alleged violation of fundamental rights under articles 14, 19, and 300A of the Constitution of India.

Detailed Analysis:

1. Legality and Propriety of the Notice Dated 5th January, 2010:
The petitioners challenged the notice issued by the Tahsildar, Palghar, which required them to hand over possession of immovable and movable properties to the Asset Reconstruction Company Ltd. ('ARCIL') within 15 days. The court found that this notice was issued in compliance with the order from the District Magistrate, Thane, under section 14 of the Act, which is a non-adjudicatory process meant to assist the secured creditor in enforcing the security interest. The court concluded that there was nothing unconstitutional or contrary to law in the impugned notice.

2. Validity of the Order Dated 24th August, 2009:
The petitioners sought to quash the order by the District Magistrate, Thane, which directed the Tahsildar to take possession of the secured assets. The court held that this order was a lawful assistance provided to the secured creditor under section 14 of the Act. The provision is intended to ensure that the proceedings initiated under section 13(2) of the Act are carried to their logical outcome. The court found no violation of legal provisions or constitutional rights in this order.

3. Compliance with Section 13(4) of the Act:
The petitioners argued that the secured creditors should have issued a notice under section 13(4) of the Act before taking possession of the secured assets. The court clarified that after the expiry of the notice period under section 13(2), the secured creditor is entitled to take measures under section 13(4) to recover the secured debt. These measures include taking possession of the secured assets. The court noted that the secured creditor had complied with the statutory requirements, and there was no procedural lapse.

4. Right to Appeal Under Section 17 of the Act:
The petitioners contended that their right to appeal under section 17 of the Act would be nullified if possession was taken without issuing a notice under section 13(4). The court observed that the borrower could invoke the remedy of an appeal under section 17 if aggrieved by the measures taken under section 13(4). The court also noted that if possession is taken unlawfully, the Debts Recovery Tribunal (DRT) is entitled to restore the status quo ante.

5. Assignment of Debt to a Third Party:
The petitioners argued that ARCIL could not invoke the provisions of the Act as the security interest was created in favor of the original bank. The court referred to section 5 of the Act, which allows a bank to assign its rights to a financial institution like ARCIL. The court found no legal impediment to such an assignment and held that ARCIL, as the assignee, could enforce the security interest.

6. Alleged Violation of Fundamental Rights:
The petitioners claimed that the impugned actions violated their fundamental rights under articles 14, 19, and 300A of the Constitution. The court held that the actions taken by the secured creditor and the authorities were in accordance with the provisions of the Act, which aims to facilitate the expeditious recovery of non-performing assets. The court found no violation of the petitioners' fundamental rights.

Conclusion:
The court dismissed the writ petition, finding no substance in the petitioners' claims. The rule was discharged, and no order as to costs was made. The court upheld the legality and propriety of the notice and the order issued by the Tahsildar and the District Magistrate, respectively, and confirmed that the secured creditor had complied with the statutory requirements under the Act.

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