Proceedings Under SARFAESI Act And RDDB Act Are Complimentary, Can Continue Parallelly: Delhi High Court

The bench of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora held that since both the proceedings are complimentary, there would be no application of principle of election of remedies and the secured creditor can avail both the remedies together.

Facts

The Petitioner availed a loan for an amount of Rs. 2,97,00,000/- from the Respondent against a mortgage of secured asset. The account of the petitioner was declared NPA.

Thereafter, the respondent issued a notice under Section 13(2) of the SARFASI Act on 20.12.2021. Thereafter, the respondent also filed an application under Section 19 of RDDB Act before the DRT for the recovery of the amount. It also filed another application under Section 14 of SARFASI Act seeking appointment of receiver to take possession of the secured asset.

The DRT allowed the application of the respondent filed under Section 19 of RDDB Act directing petitioner to pay the loan amount. Aggrieved thereby, the petitioner filed the writ petition challenging the order as well as the maintainability of the proceedings under both the Act together.

Submissions

The petitioner made the following submissions:

• Proceedings under both the Act cannot continue at the same time. The petitioner could not invoke the RDDB Act once it had issued a notice under Section 13 of the SARFAESI Act.
• The petitioner cannot be made to avail the statutory appeal under Section 20 in view of the mandatory deposit of awarded amount.

The respondent made the following counter-submissions:

• The petition is not maintainable in view of availability of statutory appeal under Section 20 of RDDB Act.

Analysis by the Court

The Court observed that the respondent had initially given a notice under Section 13(2) of the SARFAESI Act and then filed an application under Section 19 of RDDB Act seeking recovery of loan amount.

The Court held that proceedings under SARFAESI Act and RDDB Act are complimentary to each other and both the proceedings can continue parallelly.

The Court held that since both the proceedings are complimentary, there would be no application of principle of election of remedies and the secured creditor can avail both the remedies together. It held that the proceedings under the SARFAESI Act are enforcement proceedings while Section 19 of RDDB Act entails adjudication.

The Court remarked that the petition is not bona fide and is filed only overreach the recovery proceeding. Accordingly it dismissed the petition.

Case Title: Magnum Steels Ltd v. Asset Reconstruction Company (India) Ltd

Citation: 2024 LiveLaw (Del) 462

Date: 10.04.2024

Counsel for the Petitioner: Mr. Harshit Anand, Mr. Rohan Poddar and Mr. Raghav Anand, Advocates

Counsel for the Respondent: Ms. Usha Singh and Mr. Shahruk Inam, Advocates for R-1

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