The Hindu Business Line : HC says no simultaneous action under Securitisation Act, DRT

THE Madras High Court has ordered interim stay of a notice dated October 16, 2004, issued by the Central Bank of India, Chennai, under the Securitisation & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002, against a Chennai-based person for recovery of its dues, as it was contrary to the provisions of Section 13(10).

Mr Justice D. Murugesan, who heard the petition from Mr V. Ravi Srinivasan and others praying for quashing the notice, noted that the respondent Bank had already initiated proceedings against the petitioner before the Debt Recovery Tribunal, which were pending adjudication.

The petitioner had contended that the notice and the proposed action of the respondent Bank to take possession of the residential property of the petitioner at Adyar (in Chennai) were contrary to the provisions of the law, which stipulated that a secured creditor could not simultaneously pursue the remedies available to it under law to initiate recovery proceedings before the Tribunal and those available under the Act.

"As the petitioner has stated in paragraph 7 of the affidavit that the proceedings before the Debt Recovery Tribunal is pending adjudication, there will be interim injunction," the Judge ordered.

According to the petitioner, the respondent Bank had filed an application before the DRT against T.T.G. Industries Ltd for certain alleged facilities granted to them and had arrayed the petitioners as party-defendants and prayed for a decree against the defendants therein, including the petitioners, for the dues. The petitioners' counsel, Mr Aravind Subramaniam, said that they had been served the impugned notice in their alleged capacity of mortgagers to the credit facilities granted by the respondent Bank to TTG Industries.

The said TTG Industries was a sick industrial unit and was registered with the Board for Industrial & Financial Reconstruction (BIFR), where an inquiry was currently pending under the Sick Industrial Companies (Special Provisions) Act, 1985.

Though the action of the respondent in preferring a case before the DRT was specifically prohibited by the Act, yet it was seeking to do so. The Bank's action was without the prior permission of the BIFR, and hence it was bad in law. The proposed action of the Bank was arbitrary and was liable to be quashed, according to the petitioner, the counsel argued.

The petitioners also apprehended that the respondent Bank would resort to coercive action and take over the alleged mortgaged house property. It was a residential house, and in the event of the same being taken over by the Bank, the petitioners would be put to severe prejudice and hardship.

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