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2016 (1) TMI 1 - HC - Indian LawsJurisdiction to invoke provisions of SARFAESI Act - Validity of possession notice - whether the first respondent is not entitled to invoke the provisions of the SARFAESI Act; to declare the action taken by the first respondent under the SARFAESI Act, with respect to the assets of the petitioner-Company, as null and void? - Held that:- The words in whose favour security interest is created, in Section 2(zd)(iii), refers to the trustee, and not to the bank/financial institution. As the petitioner has created a charge, on its movable and immovable properties, a security interest is created in favour of the 1st respondent for due repayment of the amount payable, towards the principal and interest, on redemption of the debentures subscribed by LIC, CB. and OBC. As a security interest is created in its favour for the due repayment by the petitioner, of the financial assistance (subscription of debentures) extended by LIC, CB and OBC, and as it holds the security on behalf of banks or financial institutions (CB, OBC and LIC), the 1st respondent fulfils all the conditions stipulated in Section 2(zd)(iii) of the SARFAESI Act to become the secured creditor of the petitioner company. As the debenture trust deed itself stipulates that the security created by the petitioner in favour of the 1st respondent is to be held for the beneficial interest of LIC, CB and OBC, it matters little that the 1st respondent-debenture trustee has not, otherwise, stated that the security is held by it on behalf of banks/financial institutions. The object sought to be achieved by the SARFAESI Act is speedier recovery of NPAs of banks/financial institutions. Debenture holders, which are banks and financial institutions, constitute a class, distinct and apart from other debenture holders, and the speedier remedy, provided by the SARFAESI Act, for recovery of their mounting dues, is to reduce the fiscal burden of these banks/financial institutions created by its huge non- performing assets which is eroding its liquidity. The differentia, between debenture holders which are banks/financial institutions and those which are not, has a rational relation to the object sought to be achieved by the SARFAESI Act which is speedierrecovery of the amounts due to banks and financial institutions consequent on the defaulters account being declared as a non- performing asset. The classification satisfies the requirement of a valid classification under Article 14 of the Constitution and the challenge, to its validity, must fail. While the petitioner has an effective alternate statutory remedy under Section 17 of the SARFAESI Act, against the action taken by the 1st respondent under Section 13(4) of the Act, we see no reason to now relegate the petitioner to the statutory remedy under Section 17 of the Act, as we have dealt with all their contentions and have rejected them as devoid of merits The notice issued by the 1st respondent under Section 13(2), the action taken by them under Section 13(4), and the request made by them to the Chief Metropolitan Magistrate, Hyderabad and Vijayawada under Section 14 of the Act, are strictly in accordance with the provisions of the SARFAESI Act and do not suffer from any illegality. It would be wholly inappropriate, therefore, for us to interdict the action taken by them to recover, from the petitioner-company, the principal and interest due on the redemption of debentures, including by seeking the assistance of the Chief Metropolitan Magistrate, Hyderabad and Vijayawada, under Section 14(1) of the Act, to take possession of the secured assets of the petitioner company. Writ Petition is devoid of merits and is, accordingly, dismissed.
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