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TMI Blog2017 (1) TMI 1693X X X X Extracts X X X X X X X X Extracts X X X X ..... tution of India - whether the power given to the secured creditor under Section 13(5A) of the Act is arbitrary, irrational and without any nexus to the object? HELD THAT:- In terms of Rule 8(5) of the Rules, the authorised officer of the secured creditor is to get the secured assets valued by an approved valuer and accordingly fix the reserve price of the property. The secured assets could be brought for sale only after fixing the reserve price as above. Rule 8(6) of the Rules provides that sufficient public notice be given regarding the sale of the secured assets, in the manner as stated therein. Therefore, the interest of the debtor is adequately guarded and protected. In terms of Section 13(5A) of the Act, the secured creditor is entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. AMBILY AND SRI. K. PAUL KURIAKOSE JUDGMENT SATHISH NINAN, J. In Mardia Chemicals v. Union of India ([2004] 4 SCC 311), the constitutional validity of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, "the Act") was upheld by the Apex Court. As per Act 1 of 2013, Section 13(5A) was incorporated into the Act with effect from 15.01.2013, permitting the secured creditor to bid for the secured assets. The vires of Section 13(5A) is under challenge in this writ proceedings on the ground that it is violative of Articles 300A and 21 of the Constitution of India. 2. Heard Shri P.Chandrasekhar, learned counsel for the appellant and Shri K.K. Chandran Pillai, learned Senior C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the property that is mortgaged to secure a financial assistance availed from the bank. It would be relevant to refer to Article 300A: "300A. Persons not to be deprived of property save by authority of law.- No person shall be deprived of his property save by authority of law." A citizen could be deprived of his property only under authority of law. It is beyond cavil that an involuntary sale of the property of a citizen by a mode permitted by law, necessitated for realisation of a legally recoverable debt, is a process under the authority of law. The provisions of the Act, in addition to the other remedies, provides a mechanism for the secured creditor, for realisation of its debts. Section 13(4) of the Act provides various modes for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds. 6. It would be profitable to refer to the bill introduced to amend the Act for incorporating Section 13(5A) along with a few other provisions. The Statement of Objects and Reasons, the relevant portions of which, are as under: "The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was enacted with a view to regulate securitisation and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. The aforesaid Act enables the banks and financial institutions to realise long-term assets, manage problems of liquidity, asset liability mis-match and improve recovery by exercising powers to take possession of securi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the defaulting borrower; .................................................................................................. 6. The Bill seeks to achieve the above objects." 7. The reason behind the introduction of the said provision in the Act is obvious. For realisation of debt, when the secured assets were brought to sale, occasions would be many where there are no bidders to purchase the property for the reserve price fixed by the secured creditor. Even when the sales are adjourned to a subsequent date, the situation might often remain the same. The Act did not provide for any mechanism enabling the secured creditor to proceed further in such an event. As regards proceedings for sale in ordinary civil courts, Rules 72 and 72A u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly fix the reserve price of the property. The secured assets could be brought for sale only after fixing the reserve price as above. Rule 8(6) of the Rules provides that sufficient public notice be given regarding the sale of the secured assets, in the manner as stated therein. Therefore, the interest of the debtor is adequately guarded and protected. In terms of Section 13(5A) of the Act, the secured creditor is entitled to participate in the bid, only in the absence of any bidders for a value equal to or above the reserve price and the sale is postponed due to that contingency. It is further to be noted that the sale of the property as above is amenable to an appeal under Section 17 of the Act before the Debt Recovery Tribunal. In Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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