2016 (12) TMI 1147 - HC - Indian Laws

Recovery of amounts due under the SARFAESI Act - Failure to repay bank loan - bank initiated arbitration proceedings - Held that - Mere pendency of the arbitration proceedings would not disentitle the said respondents from recovering the amounts due under the SARFAESI Act. As regards the observations expressed by the Co- Operative Tribunal, the petitioners still have an opportunity of raising all the pleas legally available to them, including the aspect on which the Tribunal has made its observations, by availing the remedy under Section-17 of the SARFAESI Act against the measures initiated by respondent Nos.1 and 4 before the Debts Recovery Tribunal.Subject to the liberty given to the petitioners as above, the Writ Petition is dismissed.

Summary

Issues:
- Validity of arbitration award set aside by Co-Operative Tribunal
- Right of secured creditor to initiate SARFAESI Act proceedings during arbitration
- Applicability of Supreme Court judgments on the matter

Validity of arbitration award set aside by Co-Operative Tribunal:
The High Court addressed the issue of the validity of an arbitration award set aside by the Co-Operative Tribunal. The Tribunal set aside the award, citing concerns about the transfer of loan amounts and lack of examination by the Arbitrator. The High Court noted that the Tribunal's observations did not prevent the secured creditor from proceeding under the SARFAESI Act. It was emphasized that the SARFAESI Act provides for independent recovery by secured creditors, irrespective of arbitration outcomes.

Right of secured creditor to initiate SARFAESI Act proceedings during arbitration:
The petitioners argued that the secured creditor should not have initiated SARFAESI Act proceedings while arbitration was pending. The High Court examined the rights of secured creditors under the SARFAESI Act, emphasizing that they can pursue recovery independently of arbitration outcomes. Referring to the Supreme Court judgment in Transcore Vs. Union of India, the Court highlighted that the SARFAESI Act allows for non-adjudicatory recovery processes, emphasizing the rights of secured creditors to enforce security interests promptly.

Applicability of Supreme Court judgments on the matter:
The High Court analyzed the applicability of Supreme Court judgments in similar cases. Referring to the Transcore judgment, the Court emphasized that the SARFAESI Act provides an additional remedy for secured creditors, distinct from other legal proceedings. The judgment clarified that withdrawal of proceedings under other Acts is not a pre-condition for utilizing SARFAESI Act provisions. The Court concluded that the pendency of arbitration proceedings does not prevent secured creditors from exercising their rights under the SARFAESI Act. Petitioners were granted the opportunity to raise legal pleas through the SARFAESI Act against the measures initiated by the respondents. Ultimately, the Writ Petition was dismissed, and interim orders were vacated.