Phoenix ARC Private Limited Vs Vishwa Bharati Vidya Mandir & Ors. (Supreme Court of India)
In a significant ruling, the Supreme Court of India has set aside an interim order issued by the Karnataka High Court that had stayed recovery proceedings initiated by Phoenix ARC Private Limited, an Assets Reconstruction Company (ARC), against educational institutions that defaulted on loans. The apex court emphasized the limited scope of writ petitions against private entities and the existence of alternative statutory remedies under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
The dispute originated from substantial credit facilities totaling over Rs. 125 crores (approximately Rs. 105.6 crores and Rs. 20.05 crores) availed by Vishwa Bharati Vidya Mandir and St. Ann’s Education Society, respectively, from Saraswat Co-operative Bank Limited. These loans were secured by various documents, including personal guarantees and equitable mortgages on immovable properties. In April 2013, the borrowers’ accounts were classified as Non-Performing Assets (NPAs) due to repayment defaults. Consequently, the bank issued a notice under Section 13(2) of the SARFAESI Act on June 1, 2013.
In March 2014, the NPA accounts were assigned to Phoenix ARC Private Limited. Following this, the borrowers sought a repayment restructuring, entering into a Letter of Acceptance on February 27, 2015, where they acknowledged their outstanding liability. However, they again failed to meet their obligations. On August 13, 2015, Phoenix ARC issued a communication, informing the borrowers of its intent to take possession of the mortgaged properties after 15 days, citing the continuous defaults.
