Case Law Details
Poorti Rent a Car and Logistics Pvt. Ltd. Vs Kotak Mahindra Bank Ltd. (Bombay High Court)
Provisions of the SARFAESI Act can be applied even in respect of loan agreements entered into before such enactment was brought into force, we see nothing in any law to hold that the provisions thereof can never be resorted to by a bank like the respondent no.1 in circumstances such as the present. Upon noticing default being committed, the account of the petitioners was classified as a nonperforming asset by the respondent no.1. The rights of the respondent no.2 enforceable against the petitioners for default in payment of debt having passed on to it, the respondent no.1 did have the authority or sanction in law to resort to the provisions of the SARFAESI Act. Applying the parameters as laid down in paragraph 18 of the decision in M. D. Frozen Foods Exports Pvt. Ltd. (supra), since accepted in Indiabulls Housing Finance Limited (supra), we find that all such parameters in the present case are fulfilled with the result that initiation of action under Chapter III of the SARFAESI Act by the respondent no.1, being a “secured creditor” within the meaning of section 2(zd) thereof for the purpose of enforcing the security interest that was created earlier, is legally permissible. That the respondent no. 1 is the successor-in-interest of the respondent no.2, which was not a “financial institution” at the material time would make no difference insofar as consequence in law is concerned.
The arguments canvassed before the Division Bench in Kotak Mahindra Bank Ltd. (supra), to our mind, seem to be the same as those which the Andhra Pradesh High Court had the occasion to consider and which stands reversed by reason of the decision in Indiabulls Housing Finance Limited (supra). In such view of the matter, we need not keep this writ petition pending awaiting a decision of the Supreme Court in the pending appeal arising out of the decision in Kotak Mahindra Bank Ltd. (supra). Incidentally, at one point of time, the appeal arising from Kotak Mahindra Bank Ltd. (supra) and the appeal in Indiabulls Housing Finance Limited (supra) were tagged together by the Supreme Court for hearing. However, the same got segregated and the decision in Indiabulls Housing Finance Limited (supra) came to be pronounced, which in our opinion, brings about a quietus to the issue. The decision in Kotak Mahindra Bank Ltd. (supra) must, therefore, be and is held to have been impliedly overruled.
For the reasons aforesaid, we are of the opinion that the action taken by the respondent no.1 to issue demand notice under section 13 (2) of the SARFAESI Act as well as to approach the magistrate under section 14 is legal and valid and it cannot be invalidated based on the decision of this Court in Kotak Mahindra Bank Ltd. (supra). We, thus, answer the question formulated in paragraph 11 in the affirmative.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
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