TMI Blog2017 (9) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the SARFAESI Act would become applicable qua all debts owing and live when the Act became applicable to the respondent in terms of the parameters contended by learned senior counsel for the respondent and enlisted at serial Nos. i to iv in para 18. We are, thus, of the view that the appeal is completely devoid of merit, and is only an endeavour to prolong the ultimate “date of judgment” for the appellants to meet their obligations. - Civil Appeal No. 15147 of 2017 (Arising out of SLP(C) No.19559 of 2017) - - - Dated:- 21-9-2017 - Mr. Rohinton Fali Nariman And Mr. Sanjay Kishan Kaul JJ. For the Appellant : Mr. D.K.Devesh, Adv., Mr. U.P.Singh, Adv., Mr. S.K.Roshan, Adv. And Ms. Kheyali, Adv. For the Respondent : Mr. Venancio D'Costa, Adv., Mr. Faisal Sherwani, Adv., Mr. Sivij Kumar, Adv., Ms. Astha Ojha Singh, Adv. And Mr. Damandip S., Adv. JUDGMENT SANJAY KISHAN KAUL, J . 1. Leave granted. Prologue : 2. Borrowers want to see the colour of their money in haste. The problem arises when loans have to be repaid. All kinds of techniques were and are deployed, to prolong the legal endeavours to recover the debts by lending i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not adhered to, apparently almost from the inception, and the account of the appellants became a Non-Performing Asset ( NPA ) within the meaning of Section 2(1)(o) of the SARFAESI Act on 6.7.2016 itself. 7. The agreement inter se the parties contained an arbitration clause and thus, the matter went to arbitration on the lender/respondent invoking the arbitration clause on 16.11.2016. However, prior to this invocation, a notification was issued on 05.08.2016 in exercise of powers conferred under sub-clause (iv) of clause (m) of sub-section (1) of Section 2 read with Section 31A of the SARFAESI Act, specifying certain Non-Banking Financial Companies (hereinafter referred to as NBFC ) covered under clause (f) of Section 45-I of the Reserve Bank of India Act, 1934 (hereinafter referred to as the RBI Act ), having assets of ₹ 500 crore and above, as financial institutions and directing that, in public interest, the provisions of the SARFAESI Act shall apply to such financial institutions, with the exceptions of provisions of Sections 13 to 19, which shall apply only to such security interest which is obtained for securing repayment of secured debt with principal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision was only procedural in nature. The security interest was capable of being enforced under the SARFAESI Act without the intervention of the court or the tribunal, and this right was available notwithstanding any provisions contained in Sections 69 69A of the Transfer of Property Act, 1882 [Section 13(1) containing the notwithstanding provision]. It was thus pleaded that it was impermissible to take recourse to the provisions of the SARFAESI Act in respect of an account already declared an NPA, as that would amount to retrospective application of a substantive law. The appellants sought to dispute the plea of the absence of any new obligation or additional burden as advanced by the respondent, since the debts had to be repaid within 60 days from the date of issuing the notice under Section 13 of the SARFAESI Act. 13. The appellants also pleaded that the expression retrospective and retroactive are almost synonymous and in that behalf referred to the definition of these expressions as found in the Black s Law Dictionary and Wharton s Law Lexicon treating the provisions as synonymous. A reference was also made to the judgment in State Bank s Staff Union (Madras C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted, four factors are of significance: i. Existence of a present actionable debt; ii. Status of the person invoking the jurisdiction is that of a secured creditor; iii. Assets have been secured in satisfaction of the debt; and iv. That the debtor/borrower should have been declared an NPA. 19. Learned senior counsel contended that the Act itself was brought into force to eliminate the problem of recovery of the debts by means of the sale of security interest and thus, obviously applied to all the past debts which were still due and pending. The only difference was that qua the respondent, it came into force when the notification was issued. It was stated that a contrary interpretation, if taken to the logical conclusion, would imply that when the Act was brought into force, none of the existing security interests would be affected, thereby defeating the very objective of the SARFAESI Act. 20. It was further submitted that insofar as the respondent is concerned, a common notification dated 05.08.2016 specifies the financial parameters in respect of which the said Act would apply. Those parameters are met in the present case and there is no differentiation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etting up of the Debt Recovery Tribunal under the RDDB Act resulted in this specialised Tribunal entertaining such claims by the banks and financial institutions. In fact, suits from the civil jurisdiction were transferred to the Debt Recovery Tribunal. The Tribunal was, thus, an alternative to a Civil Court recovery proceedings. 27. On the SARFAESI Act being brought into force seeking to recover debts against security interest, a question was raised whether parallel proceedings could go on under the RDDB Act and the SARFAESI Act. This issue was clearly answered in favour of such simultaneous proceedings in Transcore vs. Union of India Anr.( (2008) 1 SCC 125) . A later judgment in Mathew Varghese vs. M. Amritha Kumar (2014) 5 SCC 610) also discussed this issue in the following terms: 45 . A close reading of Section 37 shows that the provisions of the SARFAESI Act or the Rules framed thereunder will be in addition to the provisions of the RDDB Act. Section 35 of the SARFAESI Act states that the provisions of the SARFAESI Act will have overriding effect notwithstanding anything inconsistent contained in any other law for the time being in force. Therefore, reading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Sections 35 and 37 of the SARFAESI Act, which read as under: 35. The provisions of this Act to override other laws. The provisions of this Act shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. . . . . 37. Application of other laws not barred. The provisions of this Act or the rules made thereunder shall be in addition to, and not in derogation of, the Companies Act, 1956 (1 of 1956), the Securities Contracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993) or any other law for the time being in force. 29. The aforesaid two Acts are, thus, complimentary to each other and it is not a case of election of remedy. 30. The only twist in the present case is that, instead of the recovery process under the RDDB Act, we are concerned with an arbitration proceeding. It is trite to say that arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditious procedure is what has been envisaged under the SARFAESI Act and the two Acts are cumulative remedies to the secured creditors. 33. SARFAESI proceedings are in the nature of enforcement proceedings, while arbitration is an adjudicatory process. In the event that the secured assets are insufficient to satisfy the debts, the secured creditor can proceed against other assets in execution against the debtor, after determination of the pending outstanding amount by a competent forum. 34. We are, thus, unequivocally of the view that the judgments of the Full Bench of the Orissa High Court in Sarthak Builders Pvt. Ltd. vs. Orissa Rural Development Corporation Limited (2014 SCC OnLine Ori 75) , the Full Bench of the Delhi High Court in HDFC Bank Limited vs. Satpal Singh Bakshi (supra) and the Division Bench of the Allahabad High Court in Pradeep Kumar Gupta vs. State of U.P (AIR 2010 All 3) lay down the correct proposition of law and the view expressed by the Andhra Pradesh High Court in M/s. Deccan Chronicles Holdings Limited vs. Union of India (AIR 2014 Andhra Pradesh 78) following the overruled decision of the Orissa High Court in Subash Chandra Panda vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes note of the existing conditions and promulgates the remedial measures to rectify those conditions. In fact the SARFAESI Act, in our view, was to remedy such a position and provide a measure against secured interests. The scheme of the SARFAESI Act, is really to provide a procedural remedy against security interest already created. Therefore, an existing borrower, who had been granted financial assistance was covered under Section 2(f) of the said Act as a borrower . Not only this expression, the definition clauses dealing with debt securities , financial assistance , financial assets , etc., clearly convey the legislative intent that the SARFAESI Act applies to all existing agreements irrespective of the fact whether the lender was a notified financial institution on the date of the execution of the agreement with the borrower or not. The scheme of the SARFAESI Act sets out an expeditious, procedural methodology, enabling the bank to take possession of the property for non-payment of dues, without intervention of the court. The mere fact that a more expeditious remedy is provided under the SARFAESI Act does not mean that it is substantive in character or has created an al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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