Case Law Details

Case Name : Paam Pharmaceuticals (India) (P.) Ltd. Vs India SME Asset Reconstruction Company Ltd. (Delhi High Court)
Appeal Number : CRL. MC NO. 867 of 2012 AND CRL. MAS 3032-33 OF 2012
Date of Judgement/Order : 09/04/2012
Related Assessment Year :
Courts : All High Courts (4249) Delhi High Court (1296)

HIGH COURT OF DELHI

Paam Pharmaceuticals (India) (P.) Ltd.

versus

India SME Asset Reconstruction Company Ltd.

CRL. MC NO. 867 of 2012 AND CRL. MAS 3032-33 OF 2012

CRL. MA NOS. 4079 & 4080 OF 2012

April 9, 2012

ORDER

Crl. MA 4080/2012 (exemption)

1. Exemption allowed subject to all just exceptions.

Application stands disposed of.

Crl. MA 4079/2012

1. This is an application preferred by the petitioner/applicant for restoration of the petition which was dismissed in default on 22.3.2012.

2. Heard. In view of the submissions made therein, the application is allowed and the petition is restored to its original number.

3. The application stands disposed of.

Crl. MA No. 867/2012 & Crl. MAs 3032-33/2012

1. This is a petition under Section 482 Cr.PC assailing the order dated 18.2.2012 passed by learned ASJ whereby the revision petition against the order dated 19.7.2011 passed by learned MM was dismissed.

2. The Small Investment Development Bank of India (SIDBI) filed a complaint against the petitioner under Section 138/141/142 of Negotiable Instruments Act on account of dishonour of two cheques of Rs. 20 lac and Rs. 2.5 lac and for non-payment of the cheques amounts despite legal notice dated 4.9.1997. The petitioners were summoned in the said complaint case as accused. In the meanwhile, SIDBI executed a Deed of Assignment in favour of the respondent India SME Asset Reconstruction Company Ltd. (ISARC) on 15.4.2010. The ISARC company was registered with RBI as securitization and reconstruction company under Section 3 of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) with the main object of expediting the recovery of amount for Non-Performing Assets (NPA) of banks/financial institutions by adopting measures of recovery or reconstruction by exercising powers under the said Act. Vide the said Assignment Deed, the complainant SIDBI had assigned all its rights, titles, interests and benefits in respect of its claims against the petitioners with security and interest therein. The ISARC filed an application before the Court of MM for continuing the aforesaid complaint against the petitioners and its substitution as a complainant under Section 5(2) of SARFAESI Act. It was stated that under the circumstances, ISARC had entered into the shoes of the complainant/SIDBI and thus entitled to continue the complaint. The said application was allowed by learned MM vide order dated 19.7.2011 and accordingly ISARC was substituted as complainant in place of SIDBI. The said order was challenged by the petitioners before the learned ASJ by a revision petition which came to be dismissed vide the impugned order dated 18.2.2012.

3. The impugned order is assailed mainly on the grounds i.e. firstly, that what could be acquired through assignment was the financial assets, which would mean that certain facilities of financial nature extended by assignor and that the chqeue was not a financial asset or a specie thereof. Secondly, that the assignment which was recognized under Order 22 Rule 10 CPC entitled the assignee to pursue its remedy under the civil law and not in the proceedings of criminal nature. It was submitted that the proceedings of the criminal nature do not come within the ambit of Section 5(4) of the SARFAESI Act.

4. I have heard learned counsel for the petitioner. Both the points which have been raised in assailing the impugned orders of the courts below do not have any merit. The relevant provisions of law under SARFAESI Act would be required to note. These read as under:

“5. Acquisition of rights or interest in financial assets.—(1) Notwithstanding anything contained in any agreement or any other law for the time being in force, any securitization company or reconstruction company may acquire financial assets of any bank or financial institution—

** ** **

(b) by entering into an agreement with such bank or financial institution for the transfer of such financial assets to such company on such terms and conditions as may be agreed upon between them.

(2) If the bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the securitisation company or the reconstruction company, such securitisation company or reconstruction company shall, on such acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in such company in relation to such financial assets.

(3) Unless otherwise expressly provided by this Act, all contracts, deeds, bonds, agreements, powers-of-attorney, grants of legal representation, permissions, approvals, consents or no-objections under any law or otherwise and other instruments of whatever nature which relate to the said financial asset and which are subsisting or having effect immediately before the acquisition of financial asset under sub-section (1) and to which the concerned bank or financial institution is a party or which are in favour of such bank or financial institution shall, after the acquisition of the financial assets, be of as full force and effect against or in favour of the securitisation company or reconstruction company, as the case may be, and may be enforced or acted upon as fully and effectually as if, in the place of the said bank or financial institution, securitisation company or reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of the securitisation company or reconstruction company, as the case may be.

(4) If, on the date of acquisition of financial asset under sub- section (1), any suit, appeal or other proceeding of whatever nature relating to the said financial asset is pending by or against the bank or financial institution, save as provided in the third proviso to subsection (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) the same shall not abate, or be discontinued or be, in any way, prejudicially affected by reason of the acquisition of financial asset by the securitisation company or reconstruction company, as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the securitisation company or reconstruction company, as the case may be.

5. Sub-section (1) starts with non-obstante clause and empowers securitization or reconstruction company to acquire financial assets of any bank or financial institution by entering into an agreement with such bank or financial institution for the transfer of such financial assets on such terms and conditions, as may be agreed between them. In the present case, there is no dispute that an assignment agreement was executed between ISARC and SIDBI on 15.4.2010. By virtue of this, ISARC agreed to acquire the loans together with all rights, titles and interests in the financial documents with underlying securities, interests, guarantees etc. in respect of such loans. So far as the terms of this assignment agreement executed between SIDBI and ISARC and that by virtue of this, ISARC had acquired all claims and interests in the loan recoverable from the petitioner, there is no dispute.

6. As per Sub-section (2), the ISARC becomes a lender of the financial assets in place of SIDBI and thus, has all the rights of SIDBI in relation to the financial assets which were acquired by it. The contention of the learned counsel for the petitioner that no financial facility was extended by SIDBI to ISARC and so the cheques in question would not be financial assets within Sub-section (2), is highly misplaced. SIDBI had advanced certain loans to the petitioners, who in discharge of their liability had issued the aforesaid cheques, which on presentation got dishonoured. By virtue of assignment deed, the financial interest mentioned therein, including the recovery of the loan amounts, would fall within the ambit of Sub-section (2). Consequently, any cheque given by the petitioner to SIDBI as towards the discharge of liability, would create the financial interest of ISARC in such instrument. This would be clearly falling within the ambit of Sub-section (2). Further, as per Sub-section (3), all contracts, deeds etc. relating to the said financial asset, which were subsisting, would get transferred with full force in favour of ISARC against the petitioner. By virtue of this Sub-section, the assignee company steps into the shoes of the assignor and acquires all rights with full force and effect against the petitioner. Sub-section (4) very clearly provides that any suit, appeal or proceedings of whatever nature relating to the said financial asset pending by or against the bank or financial institution, shall not abate or be discontinued, but shall be continued, prosecuted and enforced by or against the securitization company/assignee, as the case may be. The contention that this Sub-section (4) does not apply to criminal proceedings is apparently misconceived. Such an interpretation would amount to adding something, which is not provided in this Sub-section. This Sub-section protects the pendency of proceedings of any nature including the complaint under Section 138/142, N.I. Act filed by SIDBI against the petitioner. Since by virtue of assignment agreement, ISARC has acquired all the rights and claims of financial assets as mentioned therein, including the loan amounts as also the cheques issued by the petitioner, the complaint filed by SIDBI against the petitioner could be continued by ISARC.

7. To say that ISARC was neither the payee nor holder in due course of the said chqeues and thus, was not competent to be substituted in place of SIDBI under Section 142 of the N.I. Act is again misplaced. Certainly, the ISARC was not payee of the cheques in question which were issued by the petitioner in favour of SIDBI. However, as per Section 9 of N.I. Act read with Section 5 of the SARFAESI Act, the ISARC would be holder in due course since what was acquired by virtue of assignment deed was for consideration. As per Section 9 of the N.I. Act, ‘holder in due course’ meant any person, who for consideration becomes possessor of cheque etc. or the payee or the endorsee thereof. There cannot be any dispute that the cheque was a negotiable instrument, which was payable either to order or to the bearer. All the rights of SIDBI vests with ISARC by virtue of the assignment agreement executed between them as per Section 5 of the SARFAESI Act.

8. In view of my above discussion, I do not see any infirmity or illegality in the impugned order of the M.M. or of the learned ASJ. The petition being without any merit is hereby dismissed in limini.

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Category : Corporate Law (4040)
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Tags : high court judgments (4564) SARFAESI (45)

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