2015 (3) TMI 160 - HC - Indian Laws

Police assistance to secured creditor to enforce a security interest under the SARFAESI Act, 2002 - Section 14 of the SARFAESI Act, 2002 - Section 13(9) of the SARFAESI Act, 2002 - Proceedings before BIFR - Held that - On the first issue, I have perused the order of the District Magistrate which is at page 51 of the writ petition. The order is dated September 24, 2014. The District Magistrate records perusal of the papers and documents submitted by the respondent nos. 1 and 2. The District Magistrate in his finding observed that reasonable opportunity was afforded to the borrower in accordance with the provisions of the SARFAESI Act, 2002 and that the borrower had failed to repay the loan amount with interest. Considering such aspect, the District Magistrate was of the view that police assistance as required by the respondent nos. 1 and 2 were required to be provided and as such allowed such prayer. No material was placed before me to suggest that the District Magistrate was not apprised of the material facts relating to an application under Section 14 of the SARFAESI Act, 2002.I find no infirmity in the order passed by the District Magistrate dated September 24, 2014. In the facts of the instant case, five creditors of the respondent no. 3 are secured creditors within the meaning of Companies Act, 1956. In respect of the respondent no.3, four secured creditors are secured creditors within the meaning of the SARFAESI Act, 2002 also. Three of the four secured creditors within the meaning of the SARFAESI Act, 2002 have proceeded to invoke the provision of the SARFAESI Act, 2002 in respect of the respondent no.3. The aggregate value of the three secured creditors who have invoked the provision of the SARFAESI Act, 2002 being entitled to do so is more than 60% which is above the prescribed limit under Section 13(9) of the SARFAESI Act, 2002. In the instant case, all the secured creditors of the respondent no.3 governed by the provisions of the SARFAESI Act, 2002, excepting one, have taken measures under Section 13 of the SARFAESI Act, 2002. The collective value of the amount outstanding against the respondent no.3 in respect of three secured creditors, governed by the SARFAESI Act, 2002, is in excess of three-fourth of the value of the amount outstanding against the respondent no.3. The reference before the BIFR, therefore, has abated. All and any order of the abatement passed by the BIFR in such reference is a nullity. The writ petition is devoid of any merit. - Decided against the appellant.

Summary

Issues:
1. Validity of the order passed by the District Magistrate under Section 14 of the SARFAESI Act, 2002.
2. Whether the secured creditors of requisite value as per Section 13(9) of the SARFAESI Act, 2002 have invoked the provisions of SARFAESI Act, 2002.

Analysis:
Issue 1:
The first issue revolves around the validity of the District Magistrate's order under Section 14 of the SARFAESI Act, 2002. The petitioner contended that the District Magistrate did not consider the parameters specified in the Act while passing the order. However, the Court found that the District Magistrate adequately considered the relevant aspects under Section 14 before granting the order for police assistance. The Court observed that the borrower had failed to repay the loan amount with interest, and the District Magistrate's decision was in accordance with the Act. Therefore, the Court found no infirmity in the order passed by the District Magistrate.

Issue 2:
The second issue pertains to whether the secured creditors, as required under Section 13(9) of the SARFAESI Act, 2002, have invoked the provisions of the Act. The Court analyzed the definition of "secured creditor" under the Act and emphasized that the determining factor of 60% value is in relation to a secured creditor as defined in the SARFAESI Act, 2002. In this case, out of the five creditors of the borrower, four were considered secured creditors under the Act, and three of them had invoked the SARFAESI Act's provisions. The aggregate value of these three creditors exceeded the prescribed limit of 60%, allowing them to take action under the Act. The Court also discussed the impact of such invocation on the proceedings before the BIFR, noting that the reference before BIFR had abated due to the actions of the secured creditors. The Court dismissed the petitioner's argument regarding one creditor's exposure preventing the abatement, stating that the relevant provisions of the Act were correctly applied. The Court found no merit in the petitioner's contentions on this issue.

Conclusion:
The Court ultimately dismissed the writ petition, stating that it was devoid of merit. The Court highlighted that the relief sought based on the pendency of proceedings before the BIFR could not be granted due to the abatement of such proceedings. Therefore, the petition was dismissed, and no costs were awarded. The Court clarified that since no affidavit was invited, the allegations in the writ petition were deemed to be denied by the respondents.