Division Bench of Bombay High Court comprising of Justice S.B. Shukre and Avinash G. Gharote passed an interim order on 11th December, 2020 in the case of M/s. Radha Ispat and others vs. The State of Maharashtra and others, in which the Court interpreted the aspect of notice of security interest under SAEFAESI Act, being void-ab-initio, as security was found to be in nature of provisions under Indian Contract Act, 1872, and hence provided interim protection to the Petitioners, until the next hearing date.
Shri Gulia, Learned Counsel for the Petitioners had contended that though the security interest as created in favour of Respondent nos.5 and 6 was in the nature of Nazul land, and was not subjected to any of the attachment under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. It was also submitted that order to that effect was already passed, but such an order was without any jurisdiction. Reliance was thus placed upon the observations made in the judgment, delivered by a learned Single Judge Bench of Delhi High Court as in the case of Vishal Builders (P) Ltd. vs. Delhi Development Authority and also in the case of Narain Prasad Aggrawal vs. State of Madhya Pradesh. It was further submitted by him that all the loan agreements, guarantees and continuing guarantees, etc. between Petitioner nos.1 to 5 on one hand and the Respondent no.6 on the other, had been executed as under the provisions of Sections 126, 127, 128 and 172 of the Indian Contract Act, 1872 and the bar of Section 31 of the SARFAESI Act got applied.
The prayer of the learned Counsel for the Petitioners was that notice as served upon the Petitioners, under Section 13(2) of the SARFAESI Act by Respondent no.6 Bank was to be declared void-ab-initio. Moreover, another prayer of the Petitioners was that such agreements being in the nature of security as given under the provisions of Indian Contract Act, 1872, thus all the loan transactions in the present case would be out of the purview of the SARFAESI Act.
So far as the second contention was concerned, relating to the applicability of bar under Section 31 of the SARFAESI Act to the loan transactions in the present case, Court had its own doubts. But, so far as the first contention was concerned, which was about the non- saleability of the Nazul land, the Court found that the proposition was needed to be perused and examined at length by this Court, especially in light of the observations in the above-stated cases of Vishal Builders (P) Ltd. vs. Delhi Development Authority (supra) and the case of Narain Prasad Aggrawal vs. State of Madhya Pradesh (supra).
The Court opined that an issue notice to the Respondents for final disposal of the matter, at the admission stage, must be returnable on 19/1/2021 and in the meantime, by way of an interim order by the Court, it was directed that no coercive action could be taken against the petitioners and the securities were subjected to the condition that the petitioners shall deposit in this Court, a total amount of rupees six crore fifty lakhs, which won’t be disputed by the Petitioners.
Further, interim protection was granted to the Petitioners, which would operate till the next date, i.e., 19/1/2021. It shall also be subject to another condition that if there would be even a single default, the same shall lead to the automatic vacating of the interim relief so granted by this Court and that would even be without any reference to the Court and along with cost of one lakh rupees.
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