2024 (7) TMI 812 - HC - Indian Laws

Steps initiated by the respondent no.1-IDBI Bank, New Delhi, under the provisions of SARFAESI Act, for the loan facilities granted by respondent no.2-IDBI, Dubai to respondent no.3-company - respondent no.3-company defaulted on the debt or not - HELD THAT - From perusal of Section 96(1)(b) of IBC, 2016, it is evident that the interim moratorium only restrains any ongoing or fresh legal action or proceeding in respect of any debt pertaining to personal guarantor, and not any security interest created by the personal guarantor - there is no moratorium imposed on the respondent-bank from dealing with its security interest. Further, there is no restriction on the personal guarantor, i.e., the petitioner herein from approaching any appropriate forum to protect or preserve its assets. The appropriate forum in the present case is the DRT. Section 96(1) provides that when an application is filed under Section 95, interim moratorium shall commence on the date of the application in relation to all the debts. Section 96(1)(b) provides that during the interim moratorium period, any legal action or proceedings pending in respect of any debt, shall be deemed to have been stayed - in terms of the law of the land, any legal action or proceeding pending in respect of any debt of the petitioner, shall be deemed to have been stayed, upon commencement of the interim moratorium in terms of Section 96 of IBC, 2016. In the present case, after taking possession of the property in question, sale of the said property has still not taken place and the process under the SARFAESI Act, is still not complete. Therefore, in terms of Section 238 of the IBC, 2016, which has overriding effect over any other law, any further action by the bank, under the SARFAESI Act, is prohibited. Thus, the respondent-bank cannot continue the proceedings under the SARFAESI Act, once proceedings under the IBC, 2016, have commenced - In the present case, no sale process has commenced with respect to the property that had been mortgaged by the petitioner with the respondent-bank, as a personal guarantor. It is no longer res integra that where a remedy is available under Section 17 of the SARFAESI Act, this Court ought not to entertain writ petitions under Article 226 of the Constitution of India. The respondent-bank cannot proceed further under the SARFAESI Act, in view of the interim moratorium, operating on account of the Insolvency Proceedings pending against the petitioner, the personal guarantor. 31.2 As and when the interim moratorium is lifted, and the respondent-bank proceeds under the SARFAESI Act, the petitioner shall be at liberty to approach the learned DRT and raise all issues, including issue regarding authority and jurisdiction of the respondent-bank to proceed under the SARFAESI Act, in view of the loan having been sanctioned and disbursed in Dubai, by the respondent no.-2 bank, which is also situated in Dubai. Petition disposed off.

Summary

Issues Involved:
1. Applicability of SARFAESI Act to the loan disbursed by a foreign branch of an Indian bank.
2. Jurisdiction and authority of the respondent bank under SARFAESI Act.
3. Impact of interim moratorium under Section 96 of IBC, 2016 on SARFAESI proceedings.
4. Availability and efficacy of alternative remedies under Section 17 of the SARFAESI Act.
5. Maintainability of the writ petition under Article 226 of the Constitution of India.

Detailed Analysis:

1. Applicability of SARFAESI Act to the Loan Disbursed by a Foreign Branch of an Indian Bank:
The petitioner argued that the SARFAESI Act cannot be invoked by the respondent bank in India for a loan facility disbursed by its Dubai branch to a Dubai-based company. The petitioner contended that the debt, if any, would be governed by UAE laws, not Indian laws. The court noted that these issues regarding jurisdiction and applicability of the SARFAESI Act should be decided by the Debt Recovery Tribunal (DRT) under Section 17(1) of the SARFAESI Act.

2. Jurisdiction and Authority of the Respondent Bank under SARFAESI Act:
The petitioner claimed that the respondent bank in India lacks the jurisdiction to initiate SARFAESI proceedings on behalf of its Dubai branch. The court emphasized that the DRT has the authority to determine the jurisdiction and power of the bank to initiate such proceedings. The court cited previous judgments indicating that issues of jurisdiction should be addressed by the statutory forum established under the SARFAESI Act.

3. Impact of Interim Moratorium under Section 96 of IBC, 2016 on SARFAESI Proceedings:
The court highlighted that the interim moratorium under Section 96 of the IBC, 2016, which commenced due to the insolvency proceedings against the petitioner as a personal guarantor, applies to all debts, including those under SARFAESI proceedings. The court referred to the Supreme Court's interpretation that the interim moratorium restrains the initiation or continuation of legal actions against the debt, thus prohibiting further SARFAESI proceedings by the respondent bank.

4. Availability and Efficacy of Alternative Remedies under Section 17 of the SARFAESI Act:
The court reiterated that the petitioner has an effective alternative remedy under Section 17 of the SARFAESI Act to challenge the actions taken by the respondent bank. The court emphasized that the DRT is empowered to adjudicate all grievances related to the enforcement of security interests under the SARFAESI Act, including jurisdictional challenges.

5. Maintainability of the Writ Petition under Article 226 of the Constitution of India:
The court held that the writ petition under Article 226 is not maintainable when an effective alternative remedy is available under the SARFAESI Act. The court cited multiple precedents where the Supreme Court discouraged the High Courts from entertaining writ petitions in matters where statutory remedies exist, particularly in financial and recovery disputes. The court directed that such issues should be addressed by the DRT.

Conclusion:
The court concluded that the respondent bank cannot proceed further under the SARFAESI Act due to the interim moratorium under the IBC, 2016. The petitioner is directed to approach the DRT for adjudication of all issues, including jurisdictional challenges, once the interim moratorium is lifted. The court did not make any findings on the merits of the petitioner's claims, leaving all rights and contentions open for determination by the DRT. The writ petition was disposed of with these directions.