Case Law Details
Trishul Developers Vs L & T Housing Finance Limited (Karnataka High Court)
Conclusion: SARFAESI Act provides only secured creditors to initiate action against the borrower and a demand made by a person or legal entity who was not the secured creditor was definitely prejudicial to the interest of assessee.
Held: Assesseee-partnership firm availed financial assistance from the first respondent-Financial Institution to the tune of Rs.20,00,00,000/ for the purpose of completion of construction of projects. On default, when the first respondent initiated proceedings under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, (SARFAESI Act), assessee approached the Debt Recovery Tribunal (‘DRT’) challenging the demand notice on the ground that the notice was issued by an unconcerned party, from whom assessee had not borrowed any amount. DRT allowed the appeal. However, DRAT allowed the appeal of first respondent. DRT and DRAT have noticed the fact that the demand notice was issued on the letter head of ‘L&T Finance Ltd.’ and signed by the authorized signatory of ‘L&T Finance Ltd.’ Although it was contended that at the footer of the demand notice it was printed as ‘L&T Housing Finance Ltd’, both the DRT and DRAT had held that the demand notice was indeed issued by ‘L&T Finance Ltd’. However, the DRAT has termed this as a ‘mistake’and the mistake was curable. It was held the defect in the demand notice went to the root of the matter. The well-settled principles that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. Having regard to section 13 (2) of the Act, would empower only the secured creditors to initiate action against the borrower.The contention of assessee that as on date there was no valid demand notice issued by the secured creditor i.e., ‘L&T Housing Finance Ltd’ was correct. Assessee was legally entitled to raise the issue of locus, dehors such issue not being raised in the reply notice issued by assessee to the demand notice. The argument of the first respondent that no apparent prejudice was caused to assessee, could not be countenanced for the reason that the demand notice being invalid, having not been issued by the secured creditor, a demand made by a person or legal entity who was not the secured creditor was definitely prejudicial to the interest of assessee.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
The petitioner-Partnership Firm availed financial assistance from the first respondent-Financial Institution to the tune of Rs.20,00,00,000/- (Rupees twenty crores), for the purpose of completion of construction of projects, as per sanction letter dated 07.08.2015. On default, when the first respondent initiated proceedings under the provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002, (SARFAESI Act), the petitioner herein approached the Debt Recovery Tribunal (hereinafter referred to as ‘DRT’ for short), challenging the demand notice on the ground that the notice was issued by an unconcerned party, from whom the petitioner had not borrowed any amount. Possession notice was also sought to be quashed.
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