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2018 (7) TMI 2055

..... urity Interest Act, 2002 - petitioner claims that by virtue of Section 5(4) of the SARFAESI Act, the petitioner company is entitled to continue, prosecute and enforce all the applications, appeals and legal proceedings of whatsoever nature, which are pending on the date of Deed of Assignment with regard to 6th respondent - HELD THAT:- Sub clause (1) allows any securitisation company or reconstruction company to acquire the financial assets of any bank or financial institution by issue of debentures or bonds or any other security in the nature of debenture for consideration agreed upon between the said companies and the bank or financial institution incorporating therein such terms and conditions as may be agreed upon between them. This is more like delegating the power of the banks to recover from the debtors by securitisation company or acquisition company. However, there is no explicit power given to such delegated securitisation company or asset recovery company to further assign the same to another company or enter upon Assignment Agreement with another company to recover the secured debts of the bank. The petitioner company cannot blow hot and cold, on the one hand, by enterin .....

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..... in their capacity as trustee of ARCIL, all the financial assets granted to the sixth respondent i.e., M/s. Boss Profiles Limited together with all the underlying securities, interests, guarantee etc., and mortgagor's right, interest and title thereto in terms of Section 5 of the SARFAESI Act. Thus, the petitioner claims that by virtue of Section 5(4) of the SARFAESI Act, the petitioner company is entitled to continue, prosecute and enforce all the applications, appeals and legal proceedings of whatsoever nature, which are pending on the date of Deed of Assignment with regard to 6th respondent. 4. The petitioner further claims that the petitioner had executed another Assignment Agreement dated 17.03.2008 registered on 19.03.2008 with 16th respondent i.e., Indian Overseas Bank and by virtue of that Assignment Agreement, the said bank, has unconditionally and irrevocably assigned, transferred and released in favour of the petitioner company, in their capacity as trustee of ARCIL, all the financial assets granted to the sixth respondent with all the underlying securities, interest, guarantees etc., and the mortgagor's right, interest and title thereto as per Section 5 of the S .....

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..... etitioner company by letter dated 13.03.2013 had terminated and revoked the Agreement to Assign entered with M/s.PPL and hence, claimed that the petitioner continues to be a secured creditor of the debts of the sixth respondent with all rights and interest in the underlying securities as a member of consortium banks. 9. The petitioner further submits that the petitioner (ARCIL) can step into the shoes of the 15th and 16th respondents and the Agreement with M/s.PPL was acted upon only as per Section 62 of The Contract Act. The petitioner further claims that since there was failure on the part of M/s.PPL, the earlier contract of assignment has been discharged and once the said contract is over, they are entitled to claim and can be substituted in the place of 15th and 16th respondents. 10. Section 62 of the Indian Contract Act, 1872 reads as follows:- 62. Effect of novation, rescission, and alteration of contract.- If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed. -If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need no .....

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..... e respondents 3,4 and 5 to the Substitution Application contains only false representations stating that the petitioner company has lost its right, title and interest as a secured creditor, as the petitioner company had further entered into an Assignment Agreement with M/s.PPL and the petitioner company had lost its right to recover the dues of the sixth respondent. 13. It is also further claimed that the petitioner company is aware that the 5th respondent, on behalf of itself and on behalf of the respondents 3 and 4, had issued a demand notice under Section 13(2) of SARFAESI Act to the sixth respondent, as the same copy was marked to the petitioner company, which action, the petitioner company states that the respondents 3, 4 and 5 without taking permission from the petitioner company, which holds 38.15% of total debts of the sixth respondent, had proceeded to issue possession notice also and later, issued a sale notice dated 14.01.2012 fixing the auction sale of the properties on 22.02.2012. 14. Mean while, challenging the sale notice, one R.K.Venkatesh, in his capacity, as a guarantor for repayment of credit facilities availed by the sixth respondent, filed Securitisation Appeal .....

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..... r of consortium, however, the petitioner company without the consent of other banks, namely respondents 3, 4, and 5 and contrary to their interest, entered into an arrangement with the totally different entity, namely, M/s.PPL, wherein they agreed to assign the debts to the said company. In addition to that, the petitioner company also withdrew the consent already given to take action under SARFAESI Act, by the consortium of banks and it could be seen from the Minutes of the meeting of the secured lenders of Boss Profiles Limited (Boss Profiles), which is enclosed at page 27 of the typed set of papers filed by the respondents 3, 4 and 5 and the relevant portion at page 28 of the typed set of papers reads as follows:- ARCIL had further informed that the consent given to the Union Bank of India for taking action under Securitisation Act automatically stands withdrawn pursuant to the provisions of Securitisation Act upon entering into any settlement scheme with promoters of the borrower company. By the said act of the petitioner, who had opted out of the consortium, the petitioner company has no right to be substituted in the O.A filed by the respondents 3, 4 and 5. As such, the conso .....

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..... d reasons, the respondents have prayed for sustaining the order passed by the Debt Recovery Appellate Tribunal and to confirm the order passed by the Debt Recovery Tribunal. 21. Heard both sides and perused the materials available on record. 22. It could be seen from the documents, especially O.A.No.243 of 2007 filed by Bank of India, Dena Bank, Indian Overseas Bank, UCO Bank and Union Bank of India, as applicants have filed O.A.No.243 of 2007 against the sixth respondent herein, claiming to recover a huge sum of money, which was sanctioned to the sixth respondent company to an extent of ₹ 3,673 lakhs, in which, ₹ 3,040 lakhs constituted Term Loan and ₹ 633 lakhs being the EPCG Guarantee. The above said term loan was sanctioned initially to the sixth respondent, who had agreed to repay the said loan along with interest in half yearly instalments. It could be seen that ever since 2002, when the loan was sanctioned and till today in 2018, not even a single paisa is recovered from the sixth respondent, who are the borrowers. 23. While that being so, the petitioner company seems to have filed M.A.No.142 of 2012 seeking a prayer to substitute the petitioner company as .....

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..... 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, securitisation company or reconstruction company, as the case may be, had been a party thereto or as if they had been issued in favour of the securitisation company or 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 subsection (1) of section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) 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 securitisation company or reconstruction company, as the case may be, but the suit, appeal or other proceeding may be continued, prosecuted and enforced by or against the securitisation company or reconstruction company, as the case may be. 26. On a plain reading of the said Section and the clause, it could be seen that sub clause (1) al .....

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..... and 16th respondents was assigned to M/s.PPL with certain terms and conditions, which was pointed out in the Minutes of the Meeting of the Secured Lenders of Boss Profiles Limited (Boss Profiles) as follows:- It was further informed to the participants that Arcil has now entered into an arrangement with PPL for restructuring of the dues pertaining to Boss Profiles on the following terms and conditions:- • Total dues payable by Boss Profiles to Arcil for loans availed by them from Bank of India & Indian Overseas Bank would be crystallized at 6.85 crore. • The total upfront payment shall be ₹ 0.60 crore to be paid on or before July 15, 2009. • Balance payment of ₹ 6.25 crore will be paid in 36 monthly instalments. • Arcil shall enter into an agreement with PPL for assignment of debt. The total dues of Boss Profiles shall be assigned to PPL upon payment of entire settlement amount. ARCIL further informed participants that the consent given to the Union Bank of India (UBI) for taking action under Securitisation Act automatically stands withdrawn pursuant to the provisions of Securitisation Act upon entering into any settlement scheme with promoters o .....

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..... fy, now reverting back to the original position and trying to step into the shoes of the 15th and 16th respondents and the same cannot be permitted. Under these circumstances, We do not find any merit in the Writ Petition and the Writ Petition has to be dismissed. 33. It would be pertinent to make this observation that the banks which had issued the loan as early as in the year 2002 to an extent of ₹ 3673 lakhs had fought among themselves with the petitioner herein and had not proceeded to recover the amount due, which is a huge amount from the sixth respondent company. The banks are run only with the public money and such amount of money has not been recovered due to the lethargic acts of the banks, which are highly condemnable. Hence, a direction is issued to the Debt Recovery Tribunal to complete all the proceedings pending before it pertaining to the recovery of dues from the sixth respondent, within a period of three months from the date of receipt of copy of this order. The petitioner company is directed to deposit a sum of ₹ 10,000/- (Rupees ten thousand only) to the account of Juvenile Justice Fund, Office of the Director of Social Defence, Government Girls Home .....

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