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2015 (10) TMI 827 - HC - Companies LawChallenge to Notice inviting bids for sale of Secured assets under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act Secured creditor - Petitioner claims the amount outstanding to be ₹ 267.76 lacs which differs from the amount claimed by the Respondent of ₹ 105.65 crores Petitioner contends that notice under Section 13(4) for assignment of debts is not permissible as the same is mentioned in Section 5 and the Respondent could have taken other measures. Held that - Respondents have taken the action of assignment of debt under clause (a) of Section 13(4) the legality of which has been examined by the DRT - Intended assignment of debt by secured creditor is an independent transaction, which does not affect either the liability or the rights of the borrower Notice of sale has been challenged before the DRT and the matter challenged in the present writ, both are independent of each other Found no merits in the present writ as such dismissed Decided in favour of the Respondent.
Issues Involved:
1. Validity of the public notice dated 14.07.2015. 2. Legality of simultaneous remedies under Section 13(4) and Section 5 of the Act. 3. Rights and liabilities in the assignment of debt. 4. Jurisdiction of the Debt Recovery Tribunal versus the High Court. Issue-wise Detailed Analysis: 1. Validity of the public notice dated 14.07.2015: The petitioner challenged the notice dated 14.07.2015, issued by IFCI Ltd., inviting bids for the sale/assignment of debts/secured assets at a reserve price of Rs. 37.69 crores. The petitioner argued that this notice was issued while the legality of a previous sale notice dated 25.06.2015 was still pending before the Debt Recovery Tribunal (DRT). The court found that the notice dated 14.07.2015 was valid, as it was an independent transaction under Section 5 of the Act and did not affect the pending proceedings before the DRT. 2. Legality of simultaneous remedies under Section 13(4) and Section 5 of the Act: The petitioner contended that the law does not permit simultaneous remedies, i.e., taking possession of secured assets under Section 13(4) and assigning debt under Section 5. The court clarified that Section 13(4) allows the secured creditor to take one or more measures to recover the secured debt, including taking possession and assignment of secured assets. The assignment of debt is a separate right under Section 5 and does not preclude the actions under Section 13(4). The court cited previous judgments to support the view that assignment of debt is permissible and independent of other recovery measures. 3. Rights and liabilities in the assignment of debt: The court emphasized that the assignment of debt is an independent transaction between the secured creditor and the assignee, which does not affect the borrower's liability or rights. The transferee inherits the rights and liabilities of the transferor as per Section 5(3) of the Act. The court referred to the case of 'Kotak Mahindra Bank Ltd. Vs. Coventry Coil-O-Matic (Haryana) Ltd.' to illustrate that the amount of assignment is irrelevant to the borrower's liability. The court also mentioned that the reserved price for the transfer of debt is not related to the market value of the asset. 4. Jurisdiction of the Debt Recovery Tribunal versus the High Court: The petitioner argued that the matter should be resolved by the DRT, where the legality of the sale notice was already under examination. The court held that the challenge to the transfer of debt is distinct from the sale notice and can be addressed independently. The High Court found no merit in interfering with the secured creditor's commercial decision to assign the debt, as it does not impact the pending proceedings before the DRT. Conclusion: The High Court dismissed the writ petition, affirming that the secured creditor's actions under Section 13(4) and Section 5 are permissible and independent. The court upheld the validity of the public notice dated 14.07.2015 and ruled that the assignment of debt does not affect the borrower's liability or the pending DRT proceedings.
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