2010 (12) TMI 1284 - HC - Indian Laws

2014 (1) TMI 965 - HC

Issues Involved:
1. Validity of the notice issued under Section 13(2) of the SARFAESI Act, 2002.
2. Jurisdiction of the Company Court to entertain applications under Sections 391-394 of the Companies Act.
3. Applicability of Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1985 Act) in light of the SARFAESI Act, 2002.
4. Requirement of consent from three-fourth of secured creditors under Section 13(9) of the SARFAESI Act, 2002.
5. Availability of statutory remedy under Section 17 of the SARFAESI Act, 2002.
6. Alleged waiver and abandonment of claim by the Respondent.

Detailed Analysis:

1. Validity of the Notice Issued under Section 13(2) of the SARFAESI Act, 2002:
The court held that the notice under Section 13(2) of the SARFAESI Act, 2002 issued by Respondent No. 4 is valid. The SARFAESI Act, 2002 is a special Act with an overriding effect over other laws, including the 1985 Act. The court emphasized that the SARFAESI Act, 2002 provides for quick enforcement of security interests and does not require the withdrawal of applications pending before the Debt Recovery Tribunal for taking recourse under the SARFAESI Act, 2002.

2. Jurisdiction of the Company Court to Entertain Applications under Sections 391-394 of the Companies Act:
The Division Bench of this Court held that the Company Court has no jurisdiction to entertain applications under Sections 391-394 of the Companies Act if the matter is pending before the BIFR. This was affirmed by the special appeals filed by ING Vysya, which were allowed, and the orders of the Company Judge were set aside.

3. Applicability of Section 22 of the 1985 Act in Light of the SARFAESI Act, 2002:
The court concluded that Section 22 of the 1985 Act does not bar proceedings under Section 13(2) and 13(4) of the SARFAESI Act, 2002. The SARFAESI Act, 2002, being a later enactment with a non-obstante clause, prevails over the 1985 Act. The amendments made by the SARFAESI Act, 2002 to Section 15 of the 1985 Act further reinforce this legislative intent.

4. Requirement of Consent from Three-Fourth of Secured Creditors under Section 13(9) of the SARFAESI Act, 2002:
The court observed that Respondent No. 4 has the written consent of more than three-fourth in value of the secured creditors, as required under Section 13(9) of the SARFAESI Act, 2002. Consequently, Respondent No. 4 is entitled to take measures under Section 13(4) of the SARFAESI Act, 2002. The reference before the BIFR automatically abates when such measures are taken.

5. Availability of Statutory Remedy under Section 17 of the SARFAESI Act, 2002:
The court emphasized that the writ petition challenging the notice under Section 13(2) of the SARFAESI Act, 2002 is not maintainable due to the availability of an effective statutory remedy under Section 17 of the SARFAESI Act, 2002. The court cited the judgment in United Bank of India v. Satyawati Tondon, which reiterates that the High Court should not entertain petitions under Article 226 of the Constitution if an effective alternative remedy is available.

6. Alleged Waiver and Abandonment of Claim by the Respondent:
The court rejected the Petitioner's claim that Respondent No. 4 waived and abandoned its claim by entering into negotiations and agreeing to a scheme of settlement. The court noted that Respondent No. 4 explicitly communicated the rejection of the Petitioner's reply to the notice under Section 13(2) and later withdrew its consent to the scheme due to the delay in finalization and objections raised by ING Vysya.

Conclusion:
The High Court dismissed all the writ petitions filed by the Shamken Group of Companies, holding that the notices issued under Section 13(2) of the SARFAESI Act, 2002 are valid, and the Company Court has no jurisdiction to entertain applications under Sections 391-394 of the Companies Act when matters are pending before the BIFR. The court further held that Section 22 of the 1985 Act does not bar proceedings under the SARFAESI Act, 2002, and the Respondent No. 4 has the necessary consent from secured creditors to take action under Section 13(4) of the SARFAESI Act, 2002. The Petitioners were directed to avail the statutory remedy under Section 17 of the SARFAESI Act, 2002 if they had any grievances.

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