The High Court deemed a bank notice informing guarantors of an asset loan assignment to an ARRC as an administrative communication, not an erroneous order, dismissing the petition to quash.
The writ petition filed for issuance of certiorari to quash the notice dated 27/9/2017 dismissing the petition, consequently closing connected miscellaneous petitions.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 4/1/2018
The Honourable Mr.Justice S.Manikumar
The Honourable Mrs.Justice V.Bhavani Subbaroyan
Writ Petition No.34309 of 2017 a n d W.M.P.Nos.38179 and 38180 of 2017 P. Naveen Chakravarthy ... Petitioner Vs 1. Andhra Bank, Chetpet Branch, rep. by its Branch Manager & Authorised officer 55/61, Mc Nichols Road 6 Gound Floor Buckingham Terrace Chetpet Chennai 600 030. 2. Andhra Bank Zonal Office rep. by its Dy.General Manager & Authorised Officer 168 Lingi Chetty Street Chennai 600 001.
Petition filed under Article 226 of the Constitution of India praying for the issuance of a writ of certiorari to call for the records relating to the impugned order dated 27/9/2017, as notified in the letter of the first respondent bearing No.0784/45/616, issued by the first respondent and quash the same.
For petitioner ... Mr.B.Mohan
O R D E R
(Order of the Court was made by S.Manikumar,J)
P. Naveen Chakravarthy, one of the guarantors, to the loan availed by Ambika Conductors Private Limited, Tamil Nadu, has challenged the letter, dated 27/9/2017, of Andhra Bank, Chennai, by which, the said Bank has assigned the financial assets, to Encore Asset Reconstruction Company Private Limited (EARC), Haryana, under SARFAESI Act, 2002.
the loan account. A letter, dated 5/10/2017, has been sent by Encore Asset Reconstruction Company Private Limited, to the petitioner. Challenging the letter, dated 27/9/2017, captioned as an order, instant writ petition has been filed.
“Asset reconstruction company” means acquisition by any (asset reconstruction company) of any right or interest of any bank or financial institution in any financial assistance for the purpose of realisation of such financial assistance.”
“Asset Reconstruction Company” means a company registered with Reserve Bank under Section 3 for the purposes of carrying on the business of asset reconstruction or securitisation, or both.”
“Notwithstanding anything contained in any agreement or any other law for the time being in force, any [asset reconstruction company] may acquire financial assets of any bank or financial institution -
(a) by issuing a debenture or bond or any other security in the nature of the debenture, for consideration agreed upon between such company and the bank or financial institution, incorporating therein such terms and conditions as may be agreed upon between them; or
(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.
(1-A) Any document executed by any bank or financial institution under sub-section (1) in favour of the asset reconstruction company acquiring financial assets for the purposes of asset reconstruction or securitisation shall be exempted from stamp duty in accordance with the provisions of section 8 – F of the Indian Stamp Act, 1899 (2 of 1899).
Provided that the provisions of this subsection shall not apply where the acquisition of the financial assets by the asset reconstruction company is for the purposes other than asset reconstruction or securitisation.
(2). If the Bank or financial institution is a lender in relation to any financial assets acquired under sub-section (1) by the [asset reconstruction company], such [asset 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.
(2-A) If the bank or financial institution is holding any right, title or interest upon any tangible asset or intangible asset to secure payment of any unpaid portion of the purchase price of such asset or an obligation incurred or credit otherwise provided to enable the borrower to acquire the tangible asset or assignment or licence of intangible asset, such right, title or interest shall vest in the asset reconstruction company on acquisition of such assets under sub-section (1).
(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 asset 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, asset reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of asset 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 sub-section (1) of Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 186), 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 asset reconstruction company, as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the asset reconstruction company, as the case may be.
has contended that the security interest created is, in respect of agricultural property, stated to have been mortgaged, as a third party collateral security, from the averments, it could be deduced that when possession notice, dated 4/11/2016, was issued, under Section 13(4) of the SARFAESI Act, 2002, followed by the sale notice, dated 2/3/2017, petitioner had not questioned the same, before the appropriate forum, under Section 17 of the SARFAESI Act, 2002.
Sd/-
Assistant Registrar(CS VIII)
//True copy//
Sub Assistant Registrar
mvs.
To
3 issues framed by the court
Whether the notice intimating the assignment of a non-performing asset loan to an Asset Reconstruction Company is a valid exercise of power under Section 5 of the SARFAESI Act.
Whether the exclusion of agricultural land from Section 5 action precludes assignment of the financial asset despite agricultural collateral.
Whether the letter notifying assignment constitutes an order liable to be quashed under Article 226 of the Constitution.
4 provisions across 2 enactments
P. Naveen Chakravarthy
Andhra Bank, Chetpet Branch
Andhra Bank Zonal Office
Encore Asset Reconstruction Company Private Limited
S.Manikumar
V.Bhavani Subbaroyan
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
