Allowed

Bank of India v. Solapur Lpg (P) Ltd.

Bombay HC1 Jul 2011WP/4339/2011

Case brief

AI extract

What is this about?

The High Court set aside a Sub-Divisional Magistrate's order rejecting a banker's application under Section 14 of the Securitisation Act. The Court held that the Act provides a non-adjudicatory remedy distinct from proceedings before the Debts Recovery Tribunal, and the latter's pendency does not foreclose the former.

What did the court decide?

The order of the Sub-Divisional Magistrate is set aside, and fresh orders are to be passed on the application under Section 14 within two weeks.

Bank of India Vs Solapur Lpg (P) Ltd. — Banking and Recovery | Bombay HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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CIVIL APPELLATE JURISDICTION

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WRIT PETITION NO.4339 of 2011

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Bank of India ..Petitioner.

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versus

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Solapur LPG (P) Ltd. ..Respondent.

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.....

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Mr. O.A. Das for the Petitioner.

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Ms. Ashvini A. Thakalkar i/b Mr. Nitin P. Deshpande for the Respondent.

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......

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CORAM : DR.D.Y.CHANDRACHUD & ANOOP V. MOHTA, JJ.

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1 July 2011.

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P.C. :

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Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal.

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The Bank of India has challenged an order passed by the SubDivisional Magistrate at Solapur. The Sub-Divisional Magistrate has rejected an application filed by the bank under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

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The Petitioner instituted action under the Securitisation Act against the Respondent by issuing a notice under Section 13(2) on 5 December 2009. Thereafter when there was no reply or response

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from the Respondent, a notice was issued under Section 13(4) on 11 February 2010. Since the Respondent refused to handover physical possession of the secured asset, the Petitioner filed an application under Section 14 before the Sub-Divisional Magistrate, Solapur. In the meantime, the bank also instituted proceedings before the Debts Recovery Tribunal at Pune under Section 19 of the Recovery of Debts due to Banks and Financial Institutions Act 1993. The Sub-Divisional Magistrate rejected the application filed by the bank under Section 14 of the Securitisation Act on the ground that since the bank had already moved the Debts Recovery Tribunal under the Recovery of Debts due to Banks and Financial Institutions Act 1993, the Magistrate could not interfere in the matter which was pending before the Tribunal. The Magistrate held that the bank cannot pray for relief “in both Courts”.

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Counsel appearing on behalf of the Petitioner challenged the correctness of the order passed by the Magistrate on the ground that there is a manifest misconstruction of the provisions of law and a failure to exercise powers vested in the Magistrate by Section 14 of the Securitisation Act. An affidavit in reply has been filed by the Respondent. Counsel appearing on behalf of the Respondent urged that the bank having taken recourse to its remedy under the Act of 1993, it could not have taken recourse to the provisions of the Securitisation Act. Learned counsel submitted that in the proceedings instituted by the bank before the Debts Recovery Tribunal there is an interim order restraining the Respondent from creating third party rights.

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The order which has been passed by the Sub-Divisional Magistrate at Solapur is based on a complete misconstruction of the provisions of the Securitisation Act. In Transcore v. Union of India¹ the Supreme Court held that the object of the Securitisation Act is to provide for the enforcement of a security interest created in favour of a bank or financial institution by a non-adjudicatory process. The Securitisation Act has been held to provide an additional remedy over and above the Recovery of Debts due to Banks and Financial Institutions Act 1993. In that view of the matter, the bank was within its rights, in seeking recourse to its powers under the Securitisation Act and by moving the Magistrate under Section 14. The institution and pendency of the proceedings before the Debts Recovery Tribunal under the Act of 1993 cannot foreclose the exercise of powers by the bank under the Securitisation Act.

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For these reasons, we allow the petition and set aside the impugned order of the Sub-Divisional Magistrate, Solapur dated 19 January 2011. The Sub-Divisional Magistrate, Solapur shall now pass fresh orders on the application filed by the bank under Section 14 no later than within a period of two weeks from the date of receipt of an authenticated copy of this judgment.

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Rule is made absolute in the aforesaid terms.

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There shall be no order as to costs.

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(Dr. D.Y. Chandrachud, J.)

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(Anoop V. Mohta J.)

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1 2007(2) Bankers’ Journal 303.

Bank of India v. Solapur Lpg (P) Ltd.

Case brief

What is this about?

What did the court decide?

Bank of India v. Solapur Lpg (P) Ltd.

Case brief

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