2018 Supreme(SC) 201

SUPREME COURT OF INDIA
A.K. SIKRI, ASHOK BHUSHAN, JJ.
Indiabulls Housing Finance Limited - Appellant
Versus
M/s. Deccan Chronicle Holdings Limited & Others - Respondents
Civil Appeal No. 18 of 2018, Contempt Petition (Civil) Nos. 756 & 1693 of 2017
Decided On : 23-02-2018

IMPORTANT POINTS
Applications filed under Section 9 of the Arbitration and Conciliation Act, 1996, would not create a bar for proceeding under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
While a statute affecting substantive rights is presumed to be prospective; a statute changing the forum of remedy and the procedure is retrospective.

Headnote:(a) Arbitration and Conciliation Act, 1996 – Section 9 r/w section 13, 35 and 37, Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Act 1996 is a general Act and Act 2002 is a special Act – Hence Act 2002 will prevail over Act 1996 – Therefore applications filed under Section 9 of Act 1996, would not create a bar for proceeding under Act 2002. (Para 11, 18)

       (2008) 1 SCC 125; (2017) SCC Online SC 1211 – Relied upon

       (b) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 13 – Applicability – IBFSL advancing loans to borrower-respondents – Appellant created as sister concern – Loan by IBFSL becoming NPA, IBFSL issuing notices – Appellant brought under purview of SARFAESI – IBFSL merging into appellant with all assets and liabilities – Held, appellant was right in invoking the Act. (Para 19, 34, 35, 38)

       (2017) SCC Online SC 1211; 1990(Supp) SCC 675; (2004) 4 SCC 311 – Relied upon

       1911 2 Ch 1; 1962 Supp (1) SCR 700; (1898) 2 Q.B. 547; (2000) 5 SCC 515; (2002) 3 SCC 533; (2010) 100 SCC; – Referred

       (2014) SCC Online Ori 75 – Cited with approval

       (c) Interpretation of statute – Retrospectivity – A statute affecting substantive rights is presumed to be prospective – On the other hand, a statute changing the forum of remedy and the procedure is retrospective. (Para 42)

       (2010) 8 SCC 110 – Relied upon

       Facts of the case:

       On April 18, 2005, IBFSL was granted a certificate under Section 45-I(a) of the Reserve Bank of India Act, 1934 to operate as a Non-Banking Financial Company and, thus, act as a financial institution under the said Act. The appellant was incorporated on May 10, 2005. The appellant and IBFSL were sister concerns. The appellant was granted a registration certificate dated December 28, 2005 to commence the business of housing finance institution. The Central Government, vide Notification dated September 19, 2007, issued under Section 2(1) (m) of SARFAESI Act, specified the petitioner as a ‘financial institution’ for the purposes of the said Act.

       IBFSL disbursed a loan amount of Rs.50 crores to the respondent borrowers. IBFSL also disbursed a further amount of Rs.50 crores to the respondent borrowers. The loan facility was secured by the respondent borrowers.

       IBFSL was merged with the appellant and thereby the assets and liabilities of IBFSL stood vested in the appellant, with IBFSL and the borrowers of IBFSL, including the respondent borrowers, became the borrowers of the appellant.

       The respondent borrowers had committed default in repaying the loans advanced to them by IBFSL and, therefore, even before the merger, IBFSL had issued loan recall notice to the respondent borrowers. On March 04, 2013, the loan accounts of the contesting respondents and other co-borrowers were classified as Non Performing Assets (NPA) by IBFSL. On March 06, 2013, IBFSL filed a petition under Section 9 of the Arbitration Act, for securing the amount payable by the respondent borrowers.

       The appellant, having stepped into the shoes of IBFSL in respect of the debts owed to IBFSL, issued notice dated March 08, 2013 under Section 13(2) of SARFAESI Act to the respondent borrowers and other co-borrowers. This was followed by notice dated May 29, 2013 issued under Section 13(4) of SARFAESI Act in respect of taking over symbolic possession of the mortgaged properties.

       The respondents herein filed SA before the Debts Recovery Tribunal, Chandigarh under Section 17 of SARFAESI Act challenging the action of the appellant invoking the measures under Section 13(4) of SARFAESI Act.

       Respondents field Writ Petitions challenging, inter alia, the declaration of the account as NPA and passing of orders by the Chief Metropolitan Magistrate under Section 14 of the SARFAESI Act.

       Auction in respect of Banjara Hills properties took place on February 03, 2014 as per the date fixed. However, the sale was not finalised on account of the interim orders passed by the High Court. On February 04, 2014, when the next property was to be auctioned, the High Court gave the judgment in Writ Petition filed by the contesting respondents allowing the said writ petition and setting aside the entire invocation of the SARFAESI Act by the appellant.

       Finding of the Court:

       Respondent No.1 would be treated as ‘borrower’ within the meaning of Section 2(1)(f) of the SARFAESI Act; the arrangement would be classified as ‘security arrangement’ under Section 2(1) (zb); the agreements created ‘security interest’ under Section 2(1) (zf); and the appellant became ‘secured creditor’ within the meaning of Section 2(1)(zd) of SARFAESI Act.

       Result: Appeal allowed.