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2018 (7) TMI 2055 - HC - Indian LawsAssignment Agreement - benefit of the holders of the secured receipts issued by the trustee - Section 3 of the Securitisation and Assets Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - petitioner claims that by virtue of Section 5(4) of the SARFAESI Act, the petitioner company is entitled to continue, prosecute and enforce all the applications, appeals and legal proceedings of whatsoever nature, which are pending on the date of Deed of Assignment with regard to 6th respondent - HELD THAT - Sub clause (1) allows any securitisation company or reconstruction company to acquire the financial assets of any bank or financial institution by issue of debentures or bonds or any other security in the nature of debenture for consideration agreed upon between the said companies and the bank or financial institution incorporating therein such terms and conditions as may be agreed upon between them. This is more like delegating the power of the banks to recover from the debtors by securitisation company or acquisition company. However, there is no explicit power given to such delegated securitisation company or asset recovery company to further assign the same to another company or enter upon Assignment Agreement with another company to recover the secured debts of the bank. The petitioner company cannot blow hot and cold, on the one hand, by entering into an Assignment Agreement with the third party and on the other hand, when the said agreement did not fructify, now reverting back to the original position and trying to step into the shoes of the 15th and 16th respondents and the same cannot be permitted. There are no merit in the Writ Petition - petition dismissed.
Issues Involved:
1. Legality of the Debt Recovery Appellate Tribunal's order dismissing the petitioner's appeal. 2. Petitioner's right to be substituted as a creditor in place of the original banks. 3. Validity and implications of the Assignment Agreement between the petitioner and M/s.PPL. 4. Petitioner's claim to continue as a secured creditor after the termination of the agreement with M/s.PPL. 5. The role and conduct of the consortium banks in the recovery process. Detailed Analysis: 1. Legality of the Debt Recovery Appellate Tribunal's Order: The petitioner, an Asset Reconstruction Company (ARCIL), challenged the order of the Debt Recovery Appellate Tribunal (DRAT) dated 06.10.2017, which upheld the Debt Recovery Tribunal's (DRT) decision to dismiss the petitioner's substitution application. The petitioner argued that both tribunals failed to appreciate its right to be substituted by virtue of the Assignment Agreement with the original banks. 2. Petitioner's Right to be Substituted as a Creditor: The petitioner claimed that it had entered into Assignment Agreements with Bank of India and Indian Overseas Bank, transferring the financial assets and underlying securities related to the sixth respondent (M/s. Boss Profiles Limited) to ARCIL. The petitioner argued that under Section 5(4) of the SARFAESI Act, it was entitled to continue and enforce all legal proceedings related to the assigned debts. However, the DRT dismissed the substitution application, and the DRAT upheld this decision. 3. Validity and Implications of the Assignment Agreement with M/s.PPL: The petitioner entered into an agreement with M/s.Poddar Projects Limited (M/s.PPL) to assign the debts of the sixth respondent. M/s.PPL was to pay a total sum of ?6.85 crores in installments. The petitioner claimed that M/s.PPL failed to fulfill the payment terms, leading to the termination of the agreement. The respondents argued that the petitioner, having assigned the debts to M/s.PPL, lost its right as a secured creditor and could not claim substitution in the original recovery proceedings. 4. Petitioner's Claim to Continue as a Secured Creditor: The petitioner contended that since M/s.PPL failed to honor the agreement, ARCIL terminated the agreement and retained its rights as a secured creditor. The respondents countered that the petitioner could not have simultaneous recovery rights from both M/s.PPL and as a secured creditor. The court found that the petitioner had suppressed the fact of the agreement with M/s.PPL during the substitution application, which was crucial for the case. 5. Role and Conduct of the Consortium Banks: The consortium of banks, including respondents 3, 4, and 5, initiated legal proceedings for the recovery of dues from the sixth respondent. The petitioner argued that it had informed the consortium about the agreement with M/s.PPL, and no objections were raised. However, the respondents claimed that the petitioner withdrew its consent for SARFAESI actions and acted contrary to the consortium's interests by entering into the agreement with M/s.PPL without their consent. Conclusion: The court upheld the DRAT's order, dismissing the petitioner's substitution application. The court found that the petitioner could not revert to its original position after the agreement with M/s.PPL failed. The court also criticized the banks for their delayed recovery efforts and directed the DRT to expedite the recovery proceedings. The petitioner was ordered to deposit ?10,000 to the Juvenile Justice Fund for protracting the proceedings. The writ petition was dismissed with no costs, and connected miscellaneous petitions were closed.
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