2012 (4) TMI 142 - HC - Companies Law

Writ petition - challenging the notice dated 29.06.2011 issued to the petitioner by the first respondent/Bank for sale of the movables listed therein, by invoking the powers under the Securitisation and Reconstruction of financial Assets and Enforcement of Security Interest Act, 2002 - The first respondent/Bank in the counter affidavit has specifically admitted that they are not proceeding to sell the movable properties under the provisions of the SARFAESI Act and they are prepared to withdraw the notification unconditionally - Even though the contention of the learned counsel for the first respondent/Bank is attractive and she has taken strenuous steps to pursue this court to accept her plea, we are unable to accept the same for the simple reason that the goods which are taken by the first respondent/Bank are not the subject matter of the security - It is not the case of the petitioner that the petitioner voluntarily given possession of these goods to the bank so as to enable the bank to keep it and the bank has taken steps without even giving notice to the petitioner, who is not liable to pay any amount in respect of the borrowal - Decided in favor of the petitioner

Summary

Issues:
Challenge to notice for sale of movables under SARFAESI Act by Bank.

Analysis:
1. The writ petition challenges a notice issued by the Bank under the SARFAESI Act for the sale of movables belonging to the petitioner, a tenant in a property owned by a third party. The movables listed were not part of the security for the loan borrowed from the Bank, and the petitioner was not a guarantor for the loan.

2. The Bank, without giving notice to the petitioner, approached the Chief Judicial Magistrate to take possession of the movables. The Bank then issued a notification for the sale of these movables under the SARFAESI Act, which was challenged in the writ petition.

3. The Bank, in its counter affidavit, admitted that it was not proceeding to sell the movables under the SARFAESI Act and was willing to withdraw the notification unconditionally. The Bank also claimed reimbursement charges for expenses incurred in safeguarding the movables.

4. The Court held that the movables were not part of the security for the loan, and the Bank had no jurisdiction to invoke the SARFAESI Act against the petitioner. The Court rejected the Bank's claim for reimbursement as the petitioner was not liable for the loan borrowed by a third party.

5. The Court referred to sections 13(7) and 13(10) of the SARFAESI Act, emphasizing that the Bank cannot recover expenses from a third party not liable for the loan. The Court allowed the writ petition, setting aside the notification and directing the Bank to return the goods to the petitioner within two weeks.

6. The Court concluded that the Bank's actions were not justified under the SARFAESI Act, as the movables did not serve as security for the loan. The Bank was directed to return the goods to the petitioner, and the writ petition was allowed without costs.