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IN THE HIGH COURT OF PUNJAB AND HARYANA
Sanjay Kishan Kaul, Augustine George Masih, JJ.
Rita Machine (India) Ltd. – Appellant
Versus
Debt Recovery Appellate Tribunal and Others – Respondents
Civil Writ Petition No. 13233 of 2012 (O&M)
Decided On : 30-09-2013
The SARFESI Act permits the acquisition of rights or interest in financial assets, and the issue of assignment of debt is to be governed by the provisions of Section 5 of the SARFESI Act.
Headnote:
SARFESI Act - Recovery Proceedings - Section 13 - Assignment of Debt - Violation of Interim Order
Fact of the Case:
The petitioner defaulted in loan repayment, leading to recovery proceedings by the Central Bank of India before the Debts Recovery Tribunal. The bank initiated proceedings under Section 13 of the SARFESI Act. The petitioner objected and filed a suit. The bank assigned its debts to IARC Limited, leading to disputes and applications before the Tribunal and Appellate Tribunal.
Finding of the Court:
The court found that the assignment deed violated the interim order, leading to disobedience of the order. The court also opined that the petitioner's suit should be dismissed due to the assignment of debt without leave of the Tribunal. The court dismissed the writ petition and imposed costs on the petitioner.
Issues: Violation of interim order, disobedience of the order, dismissal of the petitioner's suit, and imposition of costs.
Ratio Decidendi: The assignment of debt fell within the purview of the interim order, leading to a violation. The court emphasized that the SARFESI Act permits the acquisition of rights or interest in financial assets and that the petitioner had no role to play in the assignment of debt. The court also clarified that the issue of assignment of debt is to be governed by the provisions of Section 5 of the SARFESI Act, and any application arising from the action taken by the bank under Section 13(4) would be confined to the enforcement of security interest.
Final Decision: The court dismissed the writ petition and imposed costs on the petitioner.
Sanjay Kishan Kaul, J.
The petitioner before us has tried every trick of the trade and outside the trade to delay recovery proceedings on having defaulted in repayment of loan. The present proceeding is one more in this direction. The petitioner, as borrower, failed to adhere to the financial discipline resulting in recovery proceedings being initiated by the Central Bank of India, the lending bank, before the Debts Recovery Tribunal, Chandigarh as O.A. No. 680 of 2002 for recovering a sum of Rs. 4,62,68,716.97/- alongwith interest and costs. In the meantime, in view of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act; 2002 (hereinafter referred to as the "SARFESI Act") having come into force, recourse to the provisions of Section 13 of the said Act was taken by the bank. Post issuance of notice u/s 13(2) of the said Act, objections being filed and the notice being issued u/s 13(4) of the said Act, the petitioner filed S.A. No. 112 of 2010 u/s 17 of the said Act.
2. In the SA, on 18.11.2009, after hearing both the parties, it was directed that "there shall be a stay of all further proceedings of the 1st respondent under the provisions of the SARFESI Act till further orders". The reference to respondent No. 1 was to the authorized officer, Central Bank of India.
3. It appears that the Central Bank of India exasperated by the lapse of period of time in which no recovery was made against the petitioner took a conscious business decision to assign its debts under the assignment agreement dated 29.03.2011. The SA and OA were both consolidated, as appears from the order dated 22.07.2011, from which the dispute in question starts. The petitioner alleged that the assignment deed was in violation of the order dated 18.11.2009 and filed I.A. No. 307 of 2011 in SA for action against persons and properties of persons who are guilty of disobedience of the orders of the Tribunal. Another application was filed by the International Asset Reconstruction Company Private Limited (in short "IARC Limited") in view of the assignment in its favour by the Central Bank of India seeking to step into the shoes of the bank. The petitioner also filed another application in the OA seeking dismissal of the same (where even a counter-claim had been filed) in view of the assignment of the debt without leave of the Tribunal. The Debts Recovery Tribunal dismissed the application of the IARC Limited in view of no assignment deed having been placed on record.
On the issue of whether there was any disobedience of the interim directions in the SA, it was held that the assignment deed would amount to transferring, alienating or otherwise dealing with or disposing of secured property and assets without permission of the Tribunal and, thus, there has been breach of the order. On the application filed by the petitioner in the OA, it was opined that since IARC Limited had not been substituted in the OA in place of the Central Bank of India, which had assigned the debt, the OA itself should be dismissed, while the same fate should not be for the counter-claim.
4. We are informed that in so far as the dismissal of the OA is concerned, appeal was preferred before the Debts Recovery Appellate Tribunal in which arguments stand concluded and the judgment has been reserved.
5. The IARC Limited and the Central Bank of India both preferred Miscellaneous Appeal No. 360 of 2011 arising from the order passed, in the SA holding that there had been disobedience of the orders dated 18.11.2009. This appeal was decided by the Debts Recovery Appellate Tribunal vide order dated 21.03.2012 opining that the interim order dated 18.11.2009 was in the context of the scope of Section 17(1) of the SARFESI Act under which provision the SA had been filed and, thus, was limited only to the actions contemplated u/s 13(4) of the SARFESI Act. It could not be construed to include any other proceedings other than envisaged u/s 13(4) of the said Act a
