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2009 (7) TMI 792 - HC - Companies LawWhether the proceedings under the SARFAESI Act, are liable to be declared as unsustainable? Held that - The cause of action can arise on different occasions in respect of the dishonour of the same cheque within a span of 6 months and it was to be confined to the first instance where notice is sent on dishonour of the cheque demanding the contents of the same. Unlike this, there, is no such adverse stipulation specifying or limiting the cause of action in respect of the further proceedings to be pursued, once a notice under section 13(2) issued, anywhere in the SARFAESI Act. This being the position, there is absolutely no bar for the secured creditor in issuing any fresh notice under section 13(2). More so when the specific case raised by the petitioner before the court below and before this court is that he had never obtained any notice stated as issued by the 1st respondent-bank earlier, in the year 2004 (Ext. P2). Thus the prayer raised by the petitioner to declare the suit as maintainable is quite wrong and unfounded. The 1st respondent is very much at liberty to proceed with Ext.P5 notice issued under section 13(2) of the SARFAESI Act.
Issues Involved:
1. Challenge to the maintainability of proceedings under the SARFAESI Act during the pendency of a civil suit. 2. Jurisdiction of the civil court versus the Debts Recovery Tribunal (DRT) under the SARFAESI Act. 3. Legality of issuing a second notice under Section 13(2) of the SARFAESI Act. Issue-Wise Detailed Analysis: 1. Challenge to the Maintainability of Proceedings under the SARFAESI Act During the Pendency of a Civil Suit: The petitioner contended that no proceedings under the SARFAESI Act should lie until the civil suit (OS 219 of 2005) for settlement of accounts is finalized. However, the court observed that the SARFAESI Act was enacted to provide a faster mechanism for secured creditors to realize dues without the need for court intervention, as stipulated under Section 13 of the Act. The Supreme Court in Mardia Chemicals v. Union of India clarified that objections raised by borrowers under Section 13(2) must be considered by secured creditors, and only thereafter can further steps under Section 13(4) be justified. This mechanism ensures that the borrower's grievances are addressed without delaying the recovery process. 2. Jurisdiction of the Civil Court Versus the Debts Recovery Tribunal (DRT) Under the SARFAESI Act: The petitioner sought a declaration that the civil suit for settlement of accounts is not barred under the SARFAESI Act. The court highlighted that the jurisdiction of civil courts is explicitly barred by Section 34 of the SARFAESI Act, which states that no civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal is empowered to determine. The DRT has exclusive jurisdiction to adjudicate disputes related to measures taken under Section 13(4) of the Act. The court emphasized that the SARFAESI Act has an overriding effect on other laws, as per Section 35, and the borrower's right to challenge the quantum of liability can be exercised before the DRT. 3. Legality of Issuing a Second Notice Under Section 13(2) of the SARFAESI Act: The petitioner argued that no second notice under Section 13(2) should be issued, as the first notice was already served in 2004. The court noted that the SARFAESI Act does not explicitly prohibit issuing a second notice under Section 13(2). The secured creditor's rights and liberties are not barred from reconsidering the matter based on objections raised by the borrower. The court dismissed the petitioner's reliance on the Negotiable Instruments Act, which has specific provisions regarding the cause of action, unlike the SARFAESI Act. The court concluded that there is no legal bar for the secured creditor to issue a fresh notice under Section 13(2), especially when the petitioner claimed not to have received the earlier notice. Conclusion: The court dismissed the writ petition, holding that the secured creditor is entitled to proceed with the notice issued under Section 13(2) of the SARFAESI Act. The petitioner's request to declare the civil suit as maintainable was found to be unfounded. The court reaffirmed the exclusive jurisdiction of the DRT in matters related to the SARFAESI Act and upheld the legality of issuing a second notice under Section 13(2).
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