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2014 Supreme(Mad) 2158
High Court of Judicature at Madras
N. PAUL VASANTHAKUMAR & K. RAVICHANDRABAABU, JJ.
M/s. Veena Textiles Limited & Another
Versus
The Authorised Officer Another
W.P. No. 8761 of 2014 & M.P. Nos. 2 & 3 of 2014
Decided On : 01-08-2014
For the Petitioner:R. Sankar Narayanan, Advocate.
For the Respondents:R1, Sri Ram for M/s. A.S. Kailasam & Associates, Advocates.
Headnote:
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 - Section 14(1) - Registration Act - Section 28 – Constitution of India, 1950 - Articles 226 and 227 – Possession of property – Jurisdiction – Quash of order - First petitioner company is carrying on business of manufacturing of textiles - First petitioner desired to have backward integration and opted to set up Spinning Mill to ensure regular and quality supply of yarn – Accordingly first petitioner prepared a project report and approached ICICI Bank for sanction of necessary loan - Project report was found to be viable - First petitioner sought loan - ICICI Bank sanctioned a loan and assured that balance amount would be disbursed by other consortium banks - SCICI now amalgamated with ICICI Bank granted - ICICI Bank further assured that balance amount would be disbursed by IIBI Bank another consortium Bank - First petitioner approached IIBI Bank for balance amount and privity of contract came through ICICI Bank - IIBI Bank sanctioned loan and disbursed same in two installments - ICICI Bank filed a suit before High Court and a Receiver was appointed by Court - First petitioner placed a proposal for One Time Settlement - After negotiation it was found that division could be sold - ICICI Bank had agreed for proposal but IIBI objected to said proposal - Spinning Mill could not be sold - Then lender Banks sold division in auction only for loss is attributable to unreasonable demand of IIBI – Held, A perusal of above said provision of law would show that document registered outside State in contravention of provisions of clause (a) of Section 28 of Registration Act shall be deemed to be null and void - There cannot be any doubt that deed of assignment is deemed to be null and void since same was made in violation of Section 28(b) of Registration Act – Consequently first respondent having not empowered to act legally against petitioners in pursuant to said deed of assignment was not entitled to initiate proceedings before second respondent under SARFAESI Act, which has resulted in passing impugned order by second respondent under Section 14(3) of SARFAESI Act - It is further to be noted that after knowing fully well that deed of assignment executed is not valid in eye of law parties to said document have once again entered into another deed of assignment on October and got it registered at Sub-Registrar office - If at all first respondent can initiate any proceeding against petitioners such right should commence only from date of said deed of assignment and not before that - Admittedly in this case impugned proceedings has emanated consequent upon said invalid and non est assignment deed only and therefore it can not be sustained - Court are of view that impugned proceedings are liable to be quashed - Writ Petition is allowed
K. Ravichandrabaabu, J.
1. The first petitioner is a Limited company incorporated under the Companies Act, 1956. The second petitioner is the Managing Director of the first petitioner company. This writ petition is filed challenging the order passed by the second respondent in Roc.No.33103/2013/M4, dated 23.12.2013, whereby the properties of the petitioners were taken possession under Section 14(1) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002, (hereinafter referred to as “SARFAESI Act”).
2. The case of the petitioners is as follows:-
(i) The first petitioner company is carrying on business of manufacturing of textiles. The first petitioner desired to have backward integration and opted to set up Spinning Mill to ensure regular and quality supply of yarn. Accordingly, the first petitioner prepared a project report and approached the ICICI Bank during 1993 for sanction of necessary loan. The project report was found to be viable. The first petitioner sought the loan of Rs.700 lakhs. ICICI Bank sanctioned a loan of Rs.400 lakhs and assured that the balance amount would be disbursed by the other consortium banks. SCICI now amalgamated with the ICICI Bank, granted Rs.200 lakhs. ICICI Bank further assured that the balance amount of Rs.100 lakhs would be disbursed by IIBI Bank, the another consortium Bank. Thus, the first petitioner approached the IIBI Bank for the balance amount of Rs.100 lakhs and the privity of contract came through ICICI Bank. IIBI Bank sanctioned loan of Rs.98.75 lakhs and disbursed the same in two installments. ICICI Bank filed a suit before the High Court of Bombay and a Receiver was appointed by the Court. The first petitioner placed a proposal for One Time Settlement. After negotiation, it was found that the division could be sold for Rs.5,00,00,000/- only. ICICI Bank had agreed for the proposal, but IIBI objected to the said proposal. The Spinning Mill could not be sold for Rs.5,00,00,000/-. Then the lender Banks sold the division in auction only for Rs.3.40 crores. The loss is attributable to unreasonable demand of IIBI. In the meanwhile, IIBI filed an Original Application in O.A.No.1013 of 1999 on the file of the DRT-1, Chennai for recovery of Rs.1,99,77,619/- with interest. The suit filed before the Bombay High Court was also transferred to DRT-1, Mumbai and renumbered as O.A.No.297 of 2000. ICICI Bank had filed an application before the DRT-1, Mumbai to appropriate a sum of Rs.2,11,56,000/-. IIBI Bank filed a petition seeking permission before DRT-1, Mumbai to withdraw a sum of Rs.41.02 lakhs from the sale proceeds. The Petition No.54 of 2005 was opposed by the petitioner company and the Tribunal rejected the petition filed by the IIBI.
(ii) IIBI Bank has executed a deed of assignment on 25.05.2011, at Calcutta, whereby various financial facilities, underline facilities with security interest were assigned to and in favour of IFCI Limited, having registered office at New Delhi. The asset of the petitioner company has been assigned to IFCI. Pursuant to the said assignment deed dated 25.05.2011, IFCI caused a possession notice dated 23.06.2012 and then publication was effected in Tamil and English dailies under Section 13(4) of the SARFAESI Act. The said possession notice is not valid and illegal. The said assignment deed dated 25.05.2011, has been questioned by the petitioners before the DRT-1, Chennai in S.A.No.114 of 2012, on various grounds.
(iii) The main contention of the petitioners in S.A.No.114 of 2012, is that there was no privity of contract between the petitioners and the IFCI and the said financial institution did not lend any money to the petitioners. The IFCI being stranger to the contract cannot act against the petitioners. The said assignment deed dated 25.05.2011 was made and executed at Calcutta in 100 Rupees Stamp Paper. Such conveyance not having been duly stamped as per the Stamps Act, is invalid. The said do
