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ROHINTON FALI NARIMAN, SANJAY KISHAN KAUL
M. D. Frozen Foods Exports Pvt. Ltd. – Appellant
Versus
Hero Fincorp Ltd. – Respondent
What is the applicability of the SARFAESI Act to debts that arose before the Act was applied to the respondent? What are the rights of a borrower when arbitration proceedings and SARFAESI proceedings are initiated simultaneously? Can SARFAESI Act proceedings be initiated for debts that were alive at the time the Act came into force, even if the lender was notified as a financial institution after the debt became an NPA?
Key Points: - A liberal policy for granting loans must be accompanied by a quick and effective recovery process (!) [1000598970004]. - Proceedings under the SARFAESI Act and arbitration proceedings can be conducted simultaneously without prejudicing the borrower's rights (!) (!) [1000598970032][1000598970033]. - The SARFAESI Act is applicable to all debts that were alive at the time the Act came into force (!) (!) [1000598970023]. - The SARFAESI Act provides a procedural remedy for enforcing security interests that already exist (!) . - The Act's application to a respondent at a later date does not make it retrospective in operation concerning past debts (!) . - The SARFAESI Act and the Recovery of Debts Due to Banks and Financial Institutions Act (RDDB Act) are complementary, and the doctrine of election of remedies does not apply (!) (!) (!) [1000598970028]. - Arbitration is an alternative to civil proceedings and can be pursued alongside SARFAESI proceedings (!) [1000598970029][1000598970031]. - SARFAESI proceedings are enforcement proceedings, while arbitration is an adjudicatory process (!) [1000598970032]. - The appeal was dismissed with costs (!) . - The High Court's view was considered correct (!) .
JUDGMENT
Sanjay Kishan Kaul, J.
Leave granted.
Prologue:
2. Borrowers want to see the colour of their money in haste. The problem arises when loans have to be repaid. All kinds of techniques were and are deployed, to prolong the legal endeavours to recover the debts by lending institutions. Thus, the procedure became cumbersome and time consuming, affecting the lending activity.
3. An endeavour towards banking sector reforms, was the setting up of Expert Committees known as 'The Andhyarujina Committee', and 'The Narasimham Committee I and II'. To facilitate the disposal of the claims of recovery made by various banks and financial institutions, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'RDDB Act') was enacted, providing for specialized tribunals, exclusively dealing with the jurisdiction of the civil courts. This was followed up by the implementation of the suggestions of the aforesaid two Committees, for bringing in a law empowering financial institutions to take possession of the securities and to sell the same without the intervention of the Court - thus the Securitisation and Reconstruction of Financial Assets and Enforce
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