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2016 (11) TMI 25 - HC - Indian LawsRights under the SARFAESI Act - continuation of ad-interim order - Held that - The Petitioner, in exercise of its powers under Section 13 of the SARFAESI Act took possession of the properties. Thereafter, this Notification and which we have declared to be not binding on the Petitioner, came to be issued. In the meanwhile, on 6th June, 2013, the Collector and District Magistrate, Kolhapur (Respondent No.3) called upon the Petitioner to hand over possession of the properties. The Petitioner requested thirty days time to adopt appropriate proceedings. The order passed on 11th June, 2013 wrongly refers to Respondent No.4 as Petitioner. The Petitioner is an ARC and which would not ordinarily ask for any interim relief. However, it was forced to apply for interim reliefs as the property in question, the possession of which was with it in terms of the measures under the SARFAESI Act, was to be handed over or returned back to Respondent No.4. Accordingly, whilst granting interim reliefs in favour of the Petitioner, it was directed to maintain status-quo. However, it was permitted to proceed with the auction but not finalize the sale pursuant thereto, until further orders. This Court did not prevent Respondent No.4 from adopting proceedings either before this Court or the DRT under Section 17 of the SARFAESI Act. Now, the order passed by this Court records that the Collector and District Magistrate cannot insist on the Petitioner handing over the possession of the property in question to Respondent No.4. We do not have any record of the further steps taken either by the Petitioner or by Respondent No.4 - Borrower. In these circumstances, we do not see any purpose of continuing this order. We do not know whether the Petitioner before us has conducted the auction, finalized it, and is now keen to hand over the possession of the property to the successful bidder. Even if all this has been done, we do not know what steps the successful bidder or auction purchaser proposes to take. In these circumstances, and on some vague understanding of the parties, we cannot continue this ad-interim order. Rather, after the Petitioner has succeeded, there is no point in restraining it from exercising its rights under the SARFAESI Act. This is more so in the facts of the present case because Respondent No.4 - Borrower is indebted to the Petitioner and other consortium banks for more than ₹ 250 Crores (approximately), and has not taken any steps to clear the debts. The request is therefore refused.
Issues Involved:
1. Whether the provisions of the SARFAESI Act override the provisions of the BRU Act. 2. The validity and effect of notifications issued under the BRU Act. 3. The rights of the secured creditor under the SARFAESI Act. 4. The implications of the notification declaring the Respondent as a relief undertaking. Detailed Analysis: 1. Whether the provisions of the SARFAESI Act override the provisions of the BRU Act: The primary issue addressed was whether the SARFAESI Act, which allows secured creditors to enforce their security interests without court intervention, overrides the BRU Act, which provides temporary relief to industrial undertakings by suspending their liabilities. The court noted that Section 35 of the SARFAESI Act stipulates that its provisions shall have effect notwithstanding anything inconsistent in any other law. Given this, the court concluded that the SARFAESI Act, being a later and special legislation aimed at ensuring the recovery of debts by banks and financial institutions, overrides the BRU Act. This conclusion was supported by the Supreme Court's decision in Madras Petrochem Ltd., which held that the SARFAESI Act prevails over other laws with similar non-obstante clauses. 2. The validity and effect of notifications issued under the BRU Act: The Petitioner challenged the notifications issued under the BRU Act that declared the Respondent as a relief undertaking, thereby suspending its liabilities. The court examined the notifications and found that they were intended to prevent unemployment by providing temporary relief to industrial undertakings. However, the court held that these notifications could not impede the rights of secured creditors under the SARFAESI Act. The court emphasized that the SARFAESI Act's provisions, especially Section 13, which allows secured creditors to enforce their security interests, must prevail. 3. The rights of the secured creditor under the SARFAESI Act: The court reiterated that the SARFAESI Act was enacted to provide a mechanism for banks and financial institutions to recover their dues without court intervention. The Act allows secured creditors to take possession of secured assets and sell them to recover debts. The court highlighted that the SARFAESI Act's framework was designed to address the inefficiencies and delays in the recovery process under previous laws. The court emphasized that the secured creditor's rights under the SARFAESI Act could not be suspended or stayed by the BRU Act's provisions or the notifications issued under it. 4. The implications of the notification declaring the Respondent as a relief undertaking: The court examined the notification dated 18th June 2016, which declared the Respondent as a relief undertaking and suspended its liabilities. The court found that this notification, by suspending the Respondent's liabilities, effectively restrained the Petitioner from enforcing its security interests under the SARFAESI Act. The court held that such a suspension was inconsistent with the SARFAESI Act's provisions, which allow secured creditors to enforce their security interests without court intervention. Consequently, the court ruled that the SARFAESI Act's provisions must prevail, and the secured creditor could proceed with enforcing its security interests. Conclusion: The court concluded that the SARFAESI Act overrides the BRU Act and the notifications issued under it. The secured creditor's rights under the SARFAESI Act to enforce security interests without court intervention must be upheld. The court set aside the impugned letter dated 6th June 2013, which directed the Petitioner to return possession of the secured assets to the Respondent. The court made the rule absolute, allowing the Petitioner to proceed with the enforcement of its security interests under the SARFAESI Act. Post-Judgment: After pronouncing the judgment, the court refused the Respondent's request to continue the interim order that maintained the status quo regarding the possession of the properties. The court noted that the Petitioner had succeeded and there was no point in restraining it from exercising its rights under the SARFAESI Act, especially given the Respondent's significant debt and lack of steps to clear it.
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