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TMI Blog2009 (7) TMI 792X X X X Extracts X X X X X X X X Extracts X X X X ..... ty to proceed with Ext.P5 notice issued under section 13(2) of the SARFAESI Act. - WP(C) NO. 20150 OF 2009 - - - Dated:- 24-7-2009 - P.P. RAMACHANDRA MENON, J. Mohan Jacobn George. P.V Parvathi, Reena Thomas and L. Ram Mohan for the Petitioner. JUDGMENT The petitioner has approached this court challenging Exts.P2 and P5 notices issued by the secured creditor invoking the relevant provisions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( SARFAESI Act ). The case of the petitioner is that, he has already approached the civil court by filing OS 219 of 2005, for settlement of accounts and unless and until the same is finalised, no proceedings under the SARFAESI Act will lie. 2. Yet another contention raised by the petitioner is that, in response to the averments in the plaint filed before the civil court, the secured creditor has filed Ext.P1 written statement, wherein the question of maintainability of the suit is also raised stating that, the proceedings under the SARFAESI Act had been taken much prior to the institution of the suit by issuing notice under section 13(2) on 18th December, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The power vested with the secured creditors as above, invoking the provisions under section 13 of the Act in the manner stipulated therein, was of course subjected to scrutiny and challenge before the DRT, as provided under section 17. By virtue of this stringent provision, the power conferred under the Statute was being exercised by different financial institutions in an indiscrete manner, which happened to be challenged in appropriate proceedings and the matter finally came up for consideration before the Apex Court in Mardia Chemicals v. Union of India [2004] 59 CLA 380 (SC)/[2004] 4 SCC 311. It was held that the opportunity given to the debtors under section 13(2) cannot be stated as an empty formality and that they are very much entitled to project their grievance by way of statement of objections and it is for the secured creditors to consider the same and only, thereafter will the secured creditors be justified in proceeding with further steps as provided under section 13(4) of the Act. As per the said decision, the various other adverse stipulations, particularly sub-section (2) to section 17, wherein 75 per cent of the liability was directed to be deposited for av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er this Act or under the RDB Act. It is provided under section 35, that the provisions of the SARFAESI Act, will have overriding effect on other laws in existence. 8. The learned counsel for the petitioner, referring to section 17 of the RDB Act submits that, the rights and liberties to approach the DRT thereunder are vested only upon the Bank and financial institutions and that no remedy is available to the borrower to dispute the facts and figures by filing objections directly before the DRT. The said submission does not appear to be correct or sustainable, for many a reason. During the earlier period, i.e., when the SARFAESI Act was not in existence, the remedy available to the bank and other financial institutions was by approaching the DRT, invoking the power under section 17; the jurisdiction and power of the civil court having been taken away, so as to deal with the case as specified. The dispute on facts, as to the quantum of the liability, would arise on filing appropriate proceedings before the DRT under section 17 and in turn, judgment/decree/order passed by the DRT would depend upon the relative merits, pleadings and evidence before the DRT. While so, the Parlia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch stringent, that alone cannot be a reason for setting aside the provision to declare the same as unconstitutional, particularly since the purpose of enactment was to avoid the delayed proceedings before the civil court or such other forum and to realise the money, instead of leaving the same as non-performing assets ( NPA ) without generating funds, in favour of the financial institutions and to make use of the same for public good. It was, however, observed that, in cases where there was no dispute on the amount due, the property can be redeemed by the borrower as provided under the statute. In the cases where the amounts were in dispute, it was also observed that the parties could very well approach the DRT and matter can be got finalised before the sale. Necessary observations were made in paragraphs 50, 54, 55 and elsewhere. It was also taken note of by the Apex Court that, the scope of jurisdiction of Civil Court, though ousted with respect to the matters provided in the Act, it could be attracted in rare cases where the issue regarding the English Mortgage was involved. But for the specific instances as aforesaid, the jurisdiction of the civil court was specifically held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit petition. 15. The learned counsel for the petitioner submits that, the statute never contemplates issuance of notice under section 13(2) twice. Since the cause of action allegedly had arisen by virtue of issuance of the first notice in 2004, no proceeding could have been justified on the basis of Ext. P5 notice issued again. The learned counsel also places reliance on the relevant provisions of the Negotiable Instruments Act, 1881 with specific reference to sections 138 and 142. 16. It is very much relevant to note that, the SARFAESI Act does never stipulate anywhere that once a notice is issued under section 13(2), it is inevitably to be followed by the measures contemplated under section 13(4). In other words, rights and liberties of the secured creditors who had chosen to issue notice under section 13(2), are not barred from considering the matter afresh on the basis of the objections to be submitted by the borrower in response to the notice as provided under sub-section (3A) to section 13 and to proceed with further steps as found to be fit and proper after effecting the corrections/modifications, if so necessitated, based on the objections; which otherwise will mak ..... X X X X Extracts X X X X X X X X Extracts X X X X
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