Application Of SARFAESI Act Is In Addition To And Not In Derogation Of RDDB Act; Both Proceedings Can Run Parallelly: Delhi HC
The Delhi High Court reiterated that an application filed under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 (RDDB Act) is maintainable being complimentary and consistent with the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The Bench of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora observed, “In view of the aforesaid position in law, the continuation of the adjudicatory proceedings by Respondent No. 1 in the application number i.e., T.A. No. 165/2022 filed under Section 19 of the RDDB Act was maintainable. There was no bar on its continuation due to the invocation of the SARFAESI proceedings, which are in the nature of enforcement proceedings, as observed by the Supreme Court…Therefore, in view of the settled position of law, filing of the present petition is not bona fide. It is evident that the Petitioners have filed the present petition to overreach the recovery proceedings, wherein the Petitioners have been found to be liable to pay an amount of Rs. 2,74,31,840.37 as on 26th November, 2021 plus interest, so as to circumvent the provisions of statutory appeal.”
Advocate Harshit Anand appeared for the Petitioners whereas Advocate Usha Singh appeared for the Respondents.
The Petitioner had executed a Loan Agreement with the Bajaj Finance Limited, Respondent herein. The account of the petitioner was declared as a Non-Performing Asset (NPA). Thereafter, Respondent issued a notice under Section 13(2) of the SARFAESI Act seeking repayment of the alleged debt. In addition to the above notice, the Respondent also filed an application under Section 19 of the RDDB Act for recovery of the alleged debts.
The Court relied on the Apex Court’s judgments in Transcore v. Union of India and Another (2008 SC), Mathew Varghese v. M. Amritha Kumar and Ors. (2014 SC) and M.D. Frozen Foods Exports Pvt. Ltd. v. Hero Fincorp Ltd.(2017 SC) and held, “the Supreme Court held that the provisions of RDDB Act are not inconsistent with the provisions of the SARFAESI Act
and the application of both the Acts were held to be complementary to each other… Subsequently, in M.D. Frozen Foods Exports Pvt. Ltd. (supra) the Supreme Court after considering the aforesaid judgments, yet again reiterated that the RDDB Act and SARFAESI Act are thus, complimentary to each other and it is not case of election of remedy. The Court held that in view of the provision of Section 37 of the SARFAESI Act, the application of the said Act will be in addition to and not in derogation of the RDDB Act.”
The Court also relied on ITC Ltd v. Blue Coast Hotels Ltd (2018 SC) and held that a debtor who has failed to discharge its liabilities is not entitled to discretionary equitable relief under Article 226 of the Constitution.
Accordingly, the writ petition was dismissed being sans merits.
Cause Title: Magnum Steels Ltd & Ors v. Asset Reconstruction Company (India)Ltd. and Anr. (Neutral Citation: 2024:DHC:2952-DB)
Appearances:
Petitioners: Advocates Harshit Anand, Rohan Poddar and Raghav Anand.
Respondents: Advocates Usha Singh and Shahruk Inam.
