2008 (7) TMI 1053 - HC - Indian Laws

Summary

Issues Involved:
1. Legality of possession notice and sale notice issued by the respondent Bank.
2. Whether the Bank can proceed under the SARFAESI Act after obtaining a preliminary decree from a Civil Court.
3. Availability and necessity of alternative remedy under Section 17 of the SARFAESI Act.

Summary:

Issue 1: Legality of Possession Notice and Sale Notice
The petitioner filed a writ petition challenging the possession notice dated 22.08.2007 and the sale notice published on 17.11.2007, claiming them to be ultra vires, unconstitutional, and illegal. The petitioner argued that the Bank's action under the SARFAESI Act after obtaining a preliminary decree was per se illegal, asserting that there cannot be two parallel actions after the suit is disposed of.

Issue 2: Bank's Right to Proceed under SARFAESI Act Post-Decree
The petitioner, who stood as a guarantor and mortgaged her property, contended that the debt had merged with the decree, and thus, the mortgage could no longer be considered a secured asset. However, the court found this argument unacceptable. The court highlighted that u/s 2(g) of The Recovery of Debts Due to Banks and Financial Institutions Act, 1993, the amount payable under a decree is also considered a debt. Furthermore, u/s 2(j) of the SARFAESI Act, the petitioner was classified as a defaulter due to the non-performing asset status of the borrower's account. The court emphasized that u/s 37 of the SARFAESI Act, the provisions of the Act are not in derogation of any other law, thus allowing the Bank to proceed under the SARFAESI Act despite the preliminary decree.

Issue 3: Alternative Remedy under Section 17 of SARFAESI Act
The court noted that the petitioner had an alternative remedy available u/s 17 of the SARFAESI Act, which allows for an appeal to the Debt Recovery Tribunal. The court referenced the Full Bench decision in Lakshmi Shankar Mills (P) Ltd. v. The Authorised Officer/Chief Manager, Indian Bank, which held that challenges to Section 13(3) notices should be addressed through the remedy available u/s 17 of the Act. The court reiterated that the Tribunal has wide powers to restore possession if the action taken under Section 13(4) is declared invalid.

Conclusion:
The court concluded that the actions taken by the respondent Bank, including the issuance of the possession notice and the subsequent sale notice, were not ultra vires, unconstitutional, or illegal. The writ petition was dismissed, and the petitioner was advised to avail the alternative remedy u/s 17 of the SARFAESI Act. Consequently, the connected petitions were also closed.