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TMI Blog2010 (7) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 3 (1)(o) of the SICA, 1985. Further contention of the petitioner-company is that respondent No. 7 has appointed Standard Chartered Bank as the operating agency under section 17(3) of the SICA, 1985. The petitioner has also stated that the company has filed a Draft Rehabilitation Scheme on October 9, 2009 and the same is pending. It has been further stated that respondent No. 2, claiming itself to be the authorised officer on behalf of consortium of banks comprising of Canara Bank and Standard Chartered Bank, has issued a notice under section 13(2) of the SARFAESI Act, 2002 on August 24, 2009. The contention of the petitioner-company is that proceedings under the SARFAESI Act, 2002 initiated by respondent No. 2 is illegal and without jurisdiction. Other grounds raised by the petitioner-company is that the proceedings initiated under the SARFAESI Act of 2002 by respondent No. 2 and notice dated August 24, 2009 are arbitrary and violative of articles 14, 19 and 21 of the Constitution of India. The petitioner-company has also raised a ground that the proceedings under the SARFAESI Act, 2002 are violative of section 22 of the SICA, 1985 and is also violative of section 13(9) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SICA, 1985 is not available to the petitioner-company, and therefore, the present case is nothing but an attempt to forestall the recovery proceedings. 4. Heard learned counsel for the parties at length and perused the record. 5. The petitioner before this court has filed this present petition being aggrieved by the notice under section 13(2) of the SARFAESI Act, 2002. The aforesaid notice has been issued by the Canara Bank, which is a bank as defined under the provisions of the SARFAESI Act, 2002. The notice was issued on August 24, 2009 and the petitioner-company has also filed a reply to the aforesaid notice. 6. A Division Bench of the Orissa High Court in Noble Aqua P. Ltd. v. State Bank of India, AIR 2008 Orissa 103 ; [2009] 148 Comp Cas 817, in paragraphs Nos. 17, 18, 19, 20, 21 and 23, has held as under (pages 825 to 827 of 148 Comp Cas) : "17. In view of such consistent judicial opinion, this court holds that the petitioner-company is entitled to protection of section 22 of the SICA. In this case, there is an order, on a contested hearing in which the bank participated, that the company is sick and its revival package is under process. 18. Faced with that situation, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice under sub-section (4) of section 13 of the Securitisation Act has been issued on April 7, 2007. But long before that, the company has been declared a sick industrial company by an order of the BIFR dated November 14, 2006. Therefore, the proceeding under the SICA was not at the stage of reference. The proceeding has gone far ahead of that and culminated in an order by which the company was declared sick on November 14, 2006. The said order was passed by the BIFR after hearing the bank and by the said order the bank was appointed an operating agency with a direction to prepare the revival scheme. Therefore, in the facts of this case, the reference cannot abate since the matter under the SICA is not pending in reference before the BIFR. Even though the bank is a party to the said order, it has neither filed any appeal therefrom nor has it asked for consent under section 22 to proceed against the petitioner-company. Therefore, this argument raised by learned counsel for the bank cannot be accepted . . . 23. Apart from that in the instant case, the court has to give a harmonious construction of the overriding clauses contained both in the SICA and in the Securitisation Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able that the secured creditor must bear in mind the say of the borrower before such a process of recovery is initiated. So as to demonstrate that the reply of the borrower to the notice under section 13(2) of the Act has been considered applying mind to it. The reasons howsoever brief that may be for not accepting the objections, if raised in the reply, must be communicated to the borrower. True, the presumption is in favour of validity of an enactment and a legislation may not be declared unconstitutional lightly more so, in the matters relating to fiscal and economic policies resorted to in the public interest, but while resorting to such legislation it would be necessary to see that the persons aggrieved get a fair deal at the hands of those who have been vested with the powers to enforce drastic steps to make recovery." 9. Not only this, keeping in view the aforesaid law laid down by the apex court and also keeping in view the fact that the respondent-bank is yet to take measures as provided under section 13(4) of the SARFAESI Act, 2002, the present petition, in the opinion of this court, is not maintainable. More over, if any action is taken against the petitioner-company, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 15 of the SICA, the protection is not available to the petitioner-company. 13. In an almost identical case, Madras High Court, in the case of Archana Spinners Ltd. v. Board for Industrial and Financial Reconstruction reported in [2007] 76 SCL 280 (Mad) ; [2009] 147 Comp Cas 387 has held, as under (page 392 of 147 Comp Cas) : "12. It is also the case of the second respondent that as against the impugned notice under section 13(2) of the SARFAESI Act, 2002, it was for the petitioner to give objection which may or may not be accepted by the second respondent by passing an order with reason under section 13(4) of the SARFAESI Act. In this case that the objection filed by the petitioner on September 5, 2005, to the impugned notice sent under section 13(2) of the SARFAESI Act, 2002, was duly examined and rejected by the second respondent on October 14, 2005. 13. In such circumstances, the petitioner has got an alternative remedy available under the SARFAESI Act, 2002 before the Debts Recovery Tribunal. It is also the case of the second respondent that in view of the amendment effected to section 15(1) of the SICA, 1985, any reference pending before the BIFR shall abate if the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it to individual transactions, more particularly when financing is through banks and financial institutions utilising the money of the people in general, namely, the depositors in the banks and public money at the disposal of the financial institutions. Therefore, wherever public interest to such a large extent is involved and it may become necessary to achieve an object which serves the public purposes, individual rights may have to give way. The public interest has always been considered to be above the private interest. Interest of an individual may, to some extent, be affected but it cannot have the potential of taking over the public interest having an impact on the socio-economic drive of the country. . .' 33. Therefore, both the Acts were enacted in public interest. In fact when an amendment was effected in the SICA, 1985 to its section 15 by including the third proviso to section 15(1), a reference about the section 13(4) of the SARFAESI Act, 2002 has been made stating that on the secured creditors representing not less than three-fourths in value of the amount outstanding have taken any measures to recover the debts under section 13(4) of the Act, a reference made under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her law except relating to certain Acts like the Foreign Exchange Regulation Act, etc. In any event, the SARFAESI Act, 2002 being the later Act with a clear overriding effect under section 35, there is absolutely no difficulty to come to the conclusion that the SARFAESI Act, 2002 is entitled to be given preference when compared to the SICA. 36. It is, in that background, when we analyse the provisions of the SICA, 1985 and SARFAESI Act, 2002 and on the basis of admitted facts one will certainly come to a conclusion that the actions taken by the second respondent is perfectly in accordance with law. In this regard, I have to state that admittedly, the second respondent has invoked its powers under section 13(2) of the SARFAESI Act, 2002 by issuing a notice on June 30, 2005. It is also admitted on fact that on the said date when the second respondent has invoked its powers under section 13(2) of the SARFAESI Act, 2002 the DRS was not sanctioned by the BIFR as required under section 19(3) of the SICA, 1985. 37. Before going into the other aspects as to whether the sanction is consequential to the consent under section 19(2) and (3) of the SICA, 1985 it is to be noted that the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment or sale for realising the secured asset ; (b)take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realising the secured asset ; (c)appoint any person (hereafter referred to as the manager), to manage the secured assets the possession of which has been taken over by the secured creditor ; (d)require at any time by notice in writing, any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor, so much of the money as is sufficient to pay the secured debt.' 39. As held by the Division Bench of this court in the case of Digivision Electronics Ltd. v. Indian Bank [2005] 126 Comp Cas 630 ; [2005] 3 CTC 513, a notice given under section 13 of the SARFAESI Act, 2002 cannot be a cause of action for any direction under article 226 of the Constitution of India because it was only a show-cause notice. 40. In addition to that in the present case after the show-cause notice was given under section 13(2) of the SARFAESI Act as required under the said sub-section the debtor can discharge the liability within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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