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No Maintainability of Appeal Under Sarfaesi Act, 2002: Gujarat High Court

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The appeal was filed under clause 15 in the Letter of Patent against the order passed by Single Judge of the Court dated 17.09.2020 via a writ petition application which held that the Court refused to interfere with the interim order passed by the Debts Recovery Tribunal-II, Ahmedabad (”DRT”) while rejecting the writ application and denied to grant relief. Therefore the Appellant dissatisfied by DRT order filed SCA no.9326 of 2020 in the case of M/S Naitik Gems v. Authorised Officer, Religare Finvest Ltd C/LPA/876/2020.


The Appellant owed a debt finance from the Respondent under various account names. The Respondent is the non-banking finance company which provided a huge amount of loan to the Petitioner which in turn defaulted in making the payment. Aggrieved by such cavalier behaviour of non-payment, the Respondent instituted proceeding under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. The Appellant challenged such an action of the Respondent before the DRT by filing the Securitization Application No.200 of 2020. The challenge before DRT included an order passed by District Magistrate, Botad dated 20.02.2020 on the ground of application filed by the Respondent under Section 14 of the SARFAESI Act, 2002. Further, it was revealed that the Single Judge rejected the writ application on the basis that the Appellant had an alternative remedy of filing the appeal before Appellate Tribunal.

Appellant’s Arguments

The counsel for the Appellant submitted before the Court that the DRT neglected in considering the notification dated 05.08.2016 issued by the Ministry of Finance providing that the Non-Banking Finance Company under Clause (f) of Section 45-I of the Reserve Bank of India Act,

1934 can come within the purview of the provisions of the SARFAESI Act, 2002 with the exception that the provision under Section 13-19 of the Act shall apply only to the security interest which is owed for securing the repayment of secured debt with the principal amount of 1 crore and above. Further, the counsel emphasised on the fact that the Respondent had seized all the accounts of the Appellant for taking possession of secured assets which was considered inappropriate because all the accounts were independent accounts so the properties of the mortgage were also independent with each account. 

Moreover, the disputed account no.68673 with the principal amount of Rs.68,10,852/- was the bone of contention to which the security interest was also created. For the purpose of taking possession of secured assets of this account, the Respondent executed the order passed by the District Magistrate. Provided that the Respondent was not entitled to take possession of the immovable property mortgaged with the respondent under account no.68673 as the principal amount did not exceed Rs.1 Crore.

Respondent’s Arguments

The counsel while questioning the maintainability of this appeal submitted before the Court that the arguments presented by the Appellant were neither raised before the learned Single Judge nor DRT. The counsel affirmed order passed by learned Single Judge had rightly dealt with the case by referring the Appellant to order appeal before Appellate Tribunal. With respect to the notification dated 05.08.2016, there was no restriction upon the creditor to not curb the secured assets of the Appellant under Section 13 of the SARFAESI Act,2002. Thus, the present appeals deserved to be dismissed.

Court’s Observation

The Court after hearing both parties observed that the counsel for Appellant concealed the applicability of notification dated 05.08.2016 that was not raised before DRT and Single Judge. Moreover, the final hearing of Securitization Application No.200 of 2020 was to be held on 23.02.2020, the same can be argued before DRT on such hearing. The Court was of the opinion that Respondent is free to proceed in accordance with law with respect to all secured assets as ordered by the District Magistrate, given under Section 14 of this act with the exception of security interest in account no.68673. It was suggestive for Respondent to proceed with account no.68673 after a decision taken by DRT on the Securitization Application No.200 of 2020.

Court’s Decision

The Court concluded this present appeal by requesting DRT, Ahmedabad to undertake the final hearing on the Securitization Application No.200 of 2020 in the first week of January 2021 and till date it is not decided by DRT on such dispute, the Respondent must refrain to proceed with respect to the account no.68673 but may proceed with other accounts. Therefore, the present appeal stands disposed and directs DRT to deal with it appropriately.  

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