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Our Legal Correspondent

Chennai March 21 A creditor was entitled to proceed against the borrower in accordance with the provisions of the Securitisation and Reconstruction of Finance Assets and Enforcement of Securities Interest (SARFAESI) Act without the withdrawal of the OA (original application) pending before the Debt Recovery Tribunal, the Madras High Court has ruled.

Rejecting the contention of the borrower (Kamaldeep Synthetics Ltd, Chennai) that notice for possession of security under Section 13(4) of the Act could be issued by creditor bank (Industrial Development Bank of India, Chennai) only after reasons for non-acceptance of objections were communicated by bank, the First Bench said that the borrower was unable to demonstrate prejudice or loss that was likely to be caused to him by reason of possession notice given.

IDBI had sanctioned assistance of Rs 400 lakh (since reduced to Rs 394 lakh) to respondent (Kamaldeep Synthetics) for setting up a new unit.

As the respondent failed to repay principal amount and interest, the appellant filed recovery application against the respondent before DRT, Chennai. The appellant, therefore, took recourse to the SARFAESI (Securitisation and Reconstruction of Finance Assets and Enforcement of Securities Interest) Act to get back the money due.

Citing a Supreme Court order in Travancore vs. Union of India [2006 5 CTC 753], the Bench ruled that the appellant was entitled to proceed in accordance with the SARFAESI Act without withdrawal of OA pending before DRT. Proviso to sub-section (3A) of Section 13 made it abundantly clear that reasons communicated by creditor shall not confer any right upon the borrower to prefer an application to DRT under Section 17 or under Section 17A to Court of Dist Judge. "We are satisfied that appellant-Bank has substantially complied with provisions of Section 13(3A) of SARFAESI Act", the Bench held.

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