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TMI Blog2017 (9) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... the claims of recovery made by various banks and financial institutions, the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as the 'RDDB Act') was enacted, providing for specialized tribunals, exclusively dealing with the jurisdiction of the civil courts. This was followed up by the implementation of the suggestions of the aforesaid two Committees, for bringing in a law empowering financial institutions to take possession of the securities and to sell the same without the intervention of the Court - thus the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the 'SARFAESI Act'). 4. The 'Statement of Objects and Reasons' for bringing in the SARFAESI Act, itself shows that the absence of legal provisions for facilitating securitisation of financial assets of banks and financial institutions was the reason for its enactment. The legal framework relating to commercial transactions had not kept pace with the changing commercial practices and financial sector reforms. The slow pace of recovery of defaulting loans and the mounting levels of non-performing assets of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interim orders were granted by the Arbitrator on 05.01.2017 restraining the appellant from creating any third party interest over the properties. On 16.02.2017, the respondent issued another notice under Section 13(2) of the SARFAESI Act for two more of the seven properties. 9. Insofar as the arbitration proceedings are concerned, the interim order of 05.01.2017 was confirmed on 03.03.2017. In order to remove any possible impediment in the SARFAESI proceedings, an application was filed by the respondent to substitute the order of status quo qua parties with the name of the appellants/borrowers, which was allowed on 19.05.2017. 10. The appellants, aggrieved by this order, filed an appeal under Section 37(2)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Arbitration Act'), which has been dismissed by the impugned order dated 13.07.2017 of the learned Single Judge of the Delhi High Court. Legal Issues: 11. A perusal of the impugned order and the submissions made by learned counsel for the parties have thrown up the following legal issues for determination: A. Whether the arbitration proceedings initiated by the respondent can be carried on alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective in operation unless made retrospective and the basis of the same is the principle of 'fairness' - (Zile Singh vs. State of Haryana (2004) 8 SCC 1); Govind Das vs. ITO (1976) 1 SCC 906); CIT vs. Vatika Township (P) Ltd. ((2015) 1 SCC 1); Shyam Sundar & Ors. vs. Ram Kumar & Ors. (2001) 8 SCC 24); Garikapatti Veeraya vs. N. Subbayah Chowdhary (1957) SCR 488); Hitendra Vishnu Thakur vs. State of Maharashtra (1994) 4 SCC 602). 15. The reason why the appellants claimed that it was a case of substantive law, and not procedural law, is that more stringent provisions in terms of the entitlement of debtors to liquidate a secured asset, without the intervention of the Court, are brought into force. 16. Another plea which was sought to be advanced is that the NBFCs stand on a different footing, and that it is not as if ipso facto, all NBFCs are included within the ambit of the Act, but only such of the NBFCs as are notified by the Central Government. Further, it was stated that the RDDB Act does not include in its term the NBFC. These factors were stated to be material to exclude the security interest created prior to the application of the Act. 17. On the first legal issue ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, by virtue of having lent monies. It is only a new remedy in terms of the manner of such recovery. The legislation itself is procedural in nature. 22. On the issue of simultaneous proceedings for recovery under the arbitration process and the SARFAESI Act it was contended that there is no prohibition in law from doing so. The process of recovery could have taken place in a civil suit prior to the enactment of the RDDB Act which provides for a specialized forum for recovery of dues. It is settled legal position that both the RDDB Act and the SARFAESI Act can be resorted to simultaneously and thus the arbitration proceedings are only an alternative to the RDDB Act. Section 37 of the SARFAESI Act, in fact, makes it clear that the provisions of the Act are in addition to and are not in derogation of any other law for the time being in force. Cleavage of judicial opinions: 23. The opinions of various High Courts, as cited before us, show that while the Full Bench of the Orissa High Court, as also the Delhi High Court and the Allahabad High Court have taken a view favourable to the respondent in terms of the simultaneous legal processes under the SARFAESI Act and arbitration recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 162) "64. ... According to American Jurisprudence, 2d, Vol. 25, p. 652, if in truth there is only one remedy, then the doctrine of election does not apply. In the present case, as stated above, the NPA Act is an additional remedy to the DRT Act. Together they constitute one remedy and, therefore, the doctrine of election does not apply. Even according to Snell's Principles of Equity (31st Edn., p. 119), the doctrine of election of remedies is applicable only when there are two or more co-existent remedies available to the litigants at the time of election which are repugnant and inconsistent. In any event, there is no repugnancy nor inconsistency between the two remedies, therefore, the doctrine of election has no application." (emphasis added) 46. A reading of Section 37 discloses that the application of the SARFAESI Act will be in addition to and not in derogation of the provisions of the RDDB Act. In other words, it will not in any way nullify or annul or impair the effect of the provisions of the RDDB Act. We are also fortified by our above statement of law as the heading of the said section also makes the position clear that application of other laws are not barred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tters which came within the scope and jurisdiction of the Debt Recovery Tribunal under the RDDB Act, could still be referred to arbitration when both parties have incorporated such a clause, the answer was given in the affirmative. (HDFC Bank Limited v. Satpal Singh Bakshi - 2013 (134) DRJ 566 (FB). That being the position, the appellants can hardly be permitted to contend that the initiation of arbitration proceedings would, in any manner, prejudice their rights to seek relief under the SARFAESI Act. 31. The discussion in the impugned order refers to a judgment of the Full Bench of the Delhi High Court in HDFC Bank Limited vs. Satpal Singh Bakshi (2013 (134) DRJ 566 (FB) opining that an arbitration is an alternative to the RDDB Act. In that context, the learned Single Judge has rightly held that this Full Bench judgment does not, in any manner, help the appellants but, in fact, supports the case of the respondent. The jurisdiction of the Civil Court is barred for matters covered by the RDDB Act, but the parties still have freedom to choose a forum, alternate to, and in place of the regular courts or judicial system for deciding their inter se disputes. All disputes relating to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Questions B & C 35. The issue of whether resort can be had to Section 13 of the SARFAESI Act in respect of debts which have arisen out of a loan agreement/mortgage created prior to the application of the SARFAESI Act to the respondent, though urged before us, appears really not to have been canvassed before the learned Single Judge of the Delhi High Court. At least, it finds no substantive mention. We, however, are of the view that in the larger interest of settling the question of law, this issue is also required to be dealt with. 36. The SARFAESI Act was brought into force to solve the problem of recovery of large debts in NPAs. Thus, the very rationale for the said Act to be brought into force was to provide an expeditious procedure where there was a security interest. It certainly did not apply retrospectively from the date when it came into force. The question is whether, the Act being applicable to the respondent at a subsequent date and thereby allowing the respondent to utilize its provisions with regards to a past debt, would make any difference to this principle. We are of the view that the answer to the same is in the negative. 37. The Act applies to all the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to by learned senior counsel for the appellants on substantive law not being retrospective in operation, unless expressly stated so in the Act would, thus, have no application to the matter in issue, in view of what we have observed aforesaid. On the other hand, as observed by Buckley, L.J. in West vs. Gwynne (1911 2 Ch 1 at pp. 11, 12), retrospective operation is one matter and interference with existing rights is another. In that context, it was ruled that the provisions of the Conveyancing of Law and Property Act, 1892 were held applicable to leases containing a covenant, condition or agreement against assigning, under-letting or parting with possession or disposing of land or property leased without license or consent to all leases whether executed before or after the commencement of the Act. Such a construction was held not to make the Act retrospective in operation but merely effected the future existing rights under all leases whether executed before or after the date of that Act. (Discussed in Trimbak Damodhar Raipurkar vs. Assaram Hiraman Patil & Ors. (1962 Supp (1) SCR 700). 40. In a similar vein, are the observations made in the case of In re Athlumney. Ex parte W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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