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TMI Blog2010 (9) TMI 224X X X X Extracts X X X X X X X X Extracts X X X X ..... isconceived, in view of the wide scope of the jurisdiction vested in the Debts Recovery Tribunal under section 17 of the Act of 2002 In the circumstances at this stage when prima facie there is a specific averment that the assignment in favour of the third respondent was effected on March 29, 2006, the reference under section 15 of the SICA was made on March 31, 2004, much after June 21, 2002, the date of commencement of the Act of 2002 and also having regard to the averment that the noticee consortium are secured creditors to the extent of 81 per cent. in respect of the assets/securities of the appellant-company in our view the reference under the SICA stands abated and such no interference is called for on this ground. Appeal dismissed. - WRIT APPEAL NO. 302 OF 2010 - - - Dated:- 21-9-2010 - SHANTANU KEMKAR AND PRAKASH SHRIVASTAVA, JJ G.M. Chaphekar and Vishal Baheti for the Appellant. Manoj Munshi for the Respondent. JUDGMENT Shantanu Kemkar, J. This intra court appeal under section 2(1) of the Madhya Pradesh Uchcha Nyayalaya (Khand Nyayapeeth Ko Appeal) Adhiniyam, 2005, has been directed against the order dated July 29, 2010, passed by the Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andard Chartered Bank are secured creditors to the extent of 81 per cent. in respect of the assets/securities of the appellant-company. It was stated that from March 2004, the operation and conduct of the financial assets/credit facilities made available to the appellant, become irregular and the appellant had failed to keep up the terms of the agreement in clearing the dues of the consortium of the Canara Bank and Standard Chartered Bank within the time given. Thus, having been evasive in settling the dues, the debts of the appellant-company has to be classified as "non-performing asset". Accordingly, by the said notice, the appellant-company was informed that the consortium of the banks will exercise all or any of the rights against the appellant as provided under section 13(4) of the Act of 2002. 5. The appellant-company submitted its representation/objection to the said notice stating therein that the noticee consortium does not represent more than three-fourths value of the amount outstanding against it and as such the noticee is not entitled to exercise the rights under section 13(4) of the Act of 2002. It was also alleged that third respondent, Standard Chartered Bank, M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Ltd. v. State Bank of India , AIR 2008 Orissa 103 ; [2009] 148 Comp Cas 817. He pointed out that the finding recorded by the learned single judge in paragraph 7 of the impugned order that the Division Bench of the Orissa High Court has upheld the action of the bank in taking action against the petitioner-company therein under the provisions of the Act of 2002, is contrary to what has been laid down by the Division Bench of the Orissa High Court. Placing reliance on the judgment of the Orissa High Court in the case of Noble Aqua P. Ltd., AIR 2008 Orissa 103 ; [2009] 148 Comp Cas 817, learned senior counsel argued that in view of the pendency of the reference under the SICA, the bar contained in section 22 of the SICA is attracted in the matter. He urged that the question with regard to the validity of transfer of security interest by the State Bank of Indore, State Bank of India and State Bank of Saurashtra in favour of the third respondent Standard Chartered Bank, who is not authorised to trade in securities, is a question which cannot be gone into by the Debts Recovery Tribunal in an appeal under section 17 of the Act of 2002. 8. Shri Manoj Munshi, learned counsel appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. v. Punjab State Industrial Development Corporation [2010] 154 Comp Cas 646 , and the judgment of the Division Bench of the Bombay High Court in the case of Nouveaw Exports P. Ltd. v. Appellate Authority for Industrial and Financial Reconstruction [2010] 159 Comp Cas 600 , and according to these judgments the reference shall stand abated, if the secured creditors, representing not less than three-fourths in value of the amount outstanding against financial assistance disbursed to the borrower of such creditors, have taken any of the measures to recover their security debt under sub-section (4) of section 13 of the Act of 2002 in view of the proviso contained in section 15 of the SICA. He further argued that the Standard Chartered Bank has not violated the provisions of the Act of 2002 and has not committed any illegality in becoming the assignee of debts due to the other banks. It is also his case that in case the appellant-company seeks to challenge the assignment made in favour of the third respondent, Standard Chartered Bank, the appellant-company has got remedy of taking appropriate steps including filing of a civil suit. He also stated the question as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im order and operative portion thereof are extracted below : Learned counsel for the petitioner has urged that the loan was taken by respondent No. 4 for opening a colour lab at 50/43, Raj Complex, K.P. Kakkar Road, Allahabad, but the loan has not been repaid by respondent No. 4 and the bank is proceeding against the petitioner who is the guarantor of the loan. It is not clear from the documents produced by learned counsel for the bank as to what steps have been taken by the bank against the borrower of the loan and merely issuance of notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, against the borrower is not sufficient. The bank should have proceeded against the borrower and exhausted all the remedies against him and thereafter the bank could have proceeded against the guarantor. Until further orders of this court, the respondents are restrained from proceeding under section 13(4) of the Act 2002 with regard to petitioner's property who was the guarantor of the loan. However, if any possession has been taken by the bank then the property shall not be sold to any one else and the petitioner s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court should be extremely careful and circumspect in exercising its discretion to grant stay in such matters. Of course, if the petitioner is able to show that its case falls within any of the exceptions carved out in Baburam Prakash Chandra Maheshwari v. Antarim Zila Parishad , AIR 1969 SC 556, Whirlpool Corporation v. Registrar of Trade Marks [1998] 8 SCC 1 and Harbanslal Sahnia v. Indian Oil Corporation Ltd. [2003] 2 SCC 107 and some other judgments, then the High Court may, after considering all the relevant parameters and public interest, pass appropriate interim order . . . It is a matter of serious concern that despite repeated pronouncement of this court, the High Courts continue to ignore the availability of statutory remedies under the DRT Act and the SARFAESI Act and exercise jurisdiction under article 226 for passing orders which have serious adverse impact on the rights of the banks and other financial institutions to recover their dues. We hope and trust that in future the High Courts will exercise their discretion in such matters with greater caution, care and circumspection." 12. In yet another case the Supreme Court in the case of Punjab Nati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Explanation.-For the removal of doubts it is hereby declared that the communication of the reasons to the borrower by the secured creditor for not having accepted his representation or objection or the likely action of the secured creditor at the stage of communication of reasons to the borrower shall not entitle the person (including borrower) to make an application to the Debts Recovery Tribunal under sub-section (1) of section 17. (2) The Debts Recovery Tribunal shall consider whether any of the measures referred to in sub-section (4) of section 13 taken by the secured creditor for enforcement of security are in accordance with the provisions of this Act and the rules made thereunder. (3) If, the Debts Recovery Tribunal, after examining the facts and circumstances of the case and evidence produced by the parties, comes to the conclusion that any of the measures referred to in sub-section (4) of section 13, taken by the secured creditor are not in accordance with the provisions of this Act and the rules made hereunder, and require restoration of the management of the secured assets to the borrower or restoration of possession of the secured assets to the borrower, it may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of the measures referred to in section 13(4) of the Act of 2002 taken by the secured creditor for enforcement of security are in accordance with the provisions of the Act of 2002 and the rules made thereunder. In the circumstances we are of the view that in the appeal the appellant's objection about non-fulfilment of requirement of section 13(9) of the Act of 2002 can be very well considered by the Debts Recovery Tribunal. The appellant's other objection that the third respondent is not registered under section 3(1) of the Act of 2002 and, therefore, the assignment made in its favour is not valid, also can be gone into in appeal in view of the powers conferred upon the Debts Recovery Tribunal under section 17(2) of the Act of 2002. 16. As regards the appellant's contention that in view of the provision contained in section 22 of the SICA the proposed action through notice under section 13(2) of the Act of 2002 is barred is not tenable in view of the second and third proviso of section 15 of the SICA which reads as under : "Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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