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TMI Blog2011 (7) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... n excess of the amount as mandated by the third proviso to section 18(1). - WRIT PETITION NO. 4231 OF 2011 - - - Dated:- 1-7-2011 - DR. D.Y. CHANDRACHUD AND ANOOP V. MOHTA, JJ. Pradeep Madhyan for the Petitioner. D.J. Khambata, Rohan Cama, Ms. Anamika Malhotra and Kedar Dighe for the Respondent. JUDGMENT Dr. D.Y. Chandrachud, J. - Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2. By an order dated 6 April, 2001 the Debts Recovery Appellate Tribunal has directed the Petitioners to deposit an amount of Rs. 7 Crores. The Debts Recovery Appellate Tribunal was moved by the Petitioners for an order of waiver under section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. An application filed by the Petitioners under section 17 was earlier dismissed by the Tribunal on 4 February, 2011. Against the order of rejection, the Petitioners filed an appeal in which an application for waiver was made. The impugned order decides that application. 3. The Petitioners have challenged the constitutional valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial institutions in India do not have power to take possession of securities and sell them. Our existing legal framework relating to commercial transactions has not kept pace with the changing commercial practices and financial sector reforms. This has resulted in slow pace of recovery of defaulting loans and mounting levels of non-performing assets of banks and financial institutions. Narasimham Committee I and II and Andhyarujina Committee constituted by the Central Government for the purpose of examining banking sector reforms have considered the need for changes in the legal system in respect of these areas. These Committees, inter alia , have suggested enactment of a new legislation for securitisation and empowering banks and financial institutions to take possession of the securities and to sell them without the intervention of the Court. Acting on these suggestions, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance, 2002 was promulgated on the 21 June, 2002 to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of the Supreme Court in Gujarat Agro Industries Co. Ltd. v. Municipal Corporation of the City of Ahmedabad 1999 (4) SCC 468, Vijay Prakash D. Mehta v. Collector of Customs (Preventive) [1989] 175 ITR 540 (SC), Anant Mills Ltd. v. State of Gujarat 1975 (2) SCC 175 and Shyam Kishore v. Municipal Corporation of Delhi 1993 (1) SCC 22. 9. Counsel appearing on behalf of the Petitioner, however, submitted that the object of both the Act of 1993 as well as of the Securitisation Act is the same viz., to ensure the speedy recovery of debts due to banks and financial institutions. Hence, it was urged that it would be plainly discriminatory and violative of Article 14 for Parliament to legislate, that while the Debts Recovery Appellate Tribunal, when it considers an appeal under the Act of 1993, can grant a complete waiver of pre-deposit, the same Tribunal is precluded from granting a waiver in the entirety, when it considers an appeal under the Securitisation Act. 10. This argument is not open to the Petitioner to urge, in any event before this Court, in view of the fact that by a recent judgment of the Supreme Court the rationale for the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 13 of Securitisation Act is recovery by non-adjudicatory process. A secured asset under Securitisation Act is an asset in which interest is created by the borrower in favour of the bank/financial institution and on that basis alone the Securitisation Act seeks to enforce the security interest by non-adjudicatory process. Essentially, the Securitisation Act deals with the rights of the secured creditor. The Securitisation Act proceeds on the basis that the debtor has failed not only to repay the debt, but he has also failed to maintain the level of margin and to maintain value of the security at a level is the other obligation of the debtor. It is this other obligation which invites applicability of Securitisation Act. It is for this reason, that section 13(1) and 13(2) of the Securitisation Act proceed on the basis that security interest in the bank/financial institution needs to be enforced expeditiously without the intervention of the Court/ Tribunal; that liability of the borrower has accrued and on account of default in repayment, the account of the borrower in the books of the bank has become non-performing. For the above reasons, Securitisation Act states that the enfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was claimed in the notice under section 13(2) was Rs. 24.72 Crores while as on the date of the order of the Appellate Tribunal the amount outstanding was Rs. 31 Crores. The Appellate Tribunal has duly considered the submissions which were urged on behalf of the Petitioners and having regard to the discipline mandated by the second and the third provisos to section 18(1) directed the Petitioner to deposit an amount of Rs. 7 Crores. The exercise of that discretion does not require any interference under Article 226 of the Constitution and in any event neither the Appellate Tribunal nor this Court would be justified in granting a waiver in excess of the amount as mandated by the third proviso to section 18(1). For these reasons, we see no merit in the Petition. The Petition is accordingly dismissed. There shall be no order as to costs. 15. Time to effect deposit is extended by a further period of six weeks from today. Counsel appearing on behalf of the Bank states that since the Court has extended time for effecting deposit by a period of six weeks from today, the bank shall maintain status quo in respect of the secured assets for that period. - - TaxTMI - TMITax - Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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