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2007 (12) TMI 295 - HC - Companies LawMandatory notice u/s.13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act 2002 - whether arbitrary illegal and violative of the Act and also violative of principles of natural justice? Held that - The stand taken by the writ petitioners in both these Writ Petitions cannot be held to be in affirmative in favour of the petitioners and hence the same is hereby negatived. However it is brought to the notice of this Court that a civil suit is pending and it is needless to say that the writ petitioner in W.P.No.6846/2007 is at liberty to pursue such remedy in accordance with law. Certain of the directions of the Debts Recovery Appellate Tribunal also need not detain this Court any longer for the reason that this Court is inclined to follow the views expressed by the learned Division Bench of the Madras High Court and the learned Division Bench of the Bombay High Court as well as specified above. Hence viewed from any angle the writ petitioners are not entitled to any of the reliefs prayed for in these Writ Petitions but however it is made clear that the petitioners are at liberty to pursue the other alternative remedies and also to pursue the suit said to be pending and such proceedings to be decided on their own merits. Suffice to state that in the light of the respective stands taken by the parties this Court is thoroughly satisfied that no relief as such can be granted in these Writ Petitions and these Writ Petitions are accordingly dismissed subject to the above observations. The non-payment of costs as per the directions of the draft also had been canvassed before this Court. It is needless to say that the parties are at liberty to pursue their remedies in accordance with law.
Issues Involved:
1. Mandatory Notice under Section 13(4) of the SARFAESI Act: Whether the action under Section 14 of the SARFAESI Act can be initiated without issuing the mandatory notice under Section 13(4) of the Act. 2. Maintainability of Writ Petition: Whether the writ petitions are maintainable considering the availability of alternative remedies under the SARFAESI Act. 3. Rights of Bona Fide Purchaser: Whether the rights of a bona fide purchaser of the property are protected under the SARFAESI Act. 4. Compliance with Directions of Debts Recovery Appellate Tribunal (DRAT): Whether the directions of the DRAT were followed by the banking institution. Detailed Analysis: 1. Mandatory Notice under Section 13(4) of the SARFAESI Act: The primary issue in both writ petitions was whether the action under Section 14 of the SARFAESI Act could be initiated without first issuing the mandatory notice under Section 13(4) of the Act. The petitioners argued that the notice under Section 13(4) is mandatory and without exhausting this, Section 14 cannot be invoked. The court examined various precedents, including decisions from the Madras High Court and Bombay High Court, which clarified that the SARFAESI Act does not require a separate notice under Section 13(4) before taking action under Section 14. The court concluded that Section 13(4) of the Act does not contemplate a notice before taking possession of the property and thus, the actions of the bank were justified. 2. Maintainability of Writ Petition: The respondents contended that the writ petitions were not maintainable as the petitioners had alternative remedies available under Section 17 of the SARFAESI Act. The court noted that the petitioners had indeed pursued alternative remedies, including filing applications before the Debts Recovery Tribunal (DRT) and the Debts Recovery Appellate Tribunal (DRAT). The court emphasized that the SARFAESI Act provides a comprehensive mechanism for addressing grievances, and the petitioners should pursue these remedies. Consequently, the court found that the writ petitions were not maintainable. 3. Rights of Bona Fide Purchaser: One of the petitioners claimed to be a bona fide purchaser of the property and argued that his rights should be protected. The court examined the circumstances under which the petitioner purchased the property and noted that the property was mortgaged to the bank at the time of purchase. The court held that the petitioner, having purchased the property during the subsistence of the mortgage, could not question the bank's actions under the SARFAESI Act. The court further observed that the petitioner could pursue remedies in the pending civil suit to establish his rights. 4. Compliance with Directions of Debts Recovery Appellate Tribunal (DRAT): The petitioners argued that the banking institution did not comply with the directions of the DRAT, which included the payment of costs and adherence to procedural requirements. The court acknowledged the directions of the DRAT but emphasized that the primary issue was the interpretation of the SARFAESI Act regarding the necessity of a notice under Section 13(4). The court concluded that the directions of the DRAT did not alter the legal position established by the precedents from the Madras High Court and Bombay High Court. The court advised the petitioners to pursue their remedies for non-compliance with the DRAT's directions through appropriate legal channels. Conclusion: The court dismissed both writ petitions, holding that the actions under Section 14 of the SARFAESI Act were valid without the need for a separate notice under Section 13(4). The court also emphasized the availability of alternative remedies under the SARFAESI Act and the pending civil suit as appropriate avenues for the petitioners to pursue their grievances. The court's decision was based on a thorough examination of legal precedents and the specific facts of the case.
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