Bank Entitled To Proceed U/S 13 SARFAESI Act Notwithstanding That Debt Portfolio Was Assigned To It By NBFC

Case: Poorti Rent a Car and Logistics Pvt. Ltd. & ors. vs. Kotak Mahindra Bank Ltd. & ors.

Coram: Chief Justice Dipankar Datta and Justice MS Karnik

Case No.: Writ Petition No. 11371 Of 2014

Court Observation: “initiation of action under Chapter III of the SARFAESI Act by the respondent no.1, being a “secured creditor” within the meaning of section 2(zd) thereof for the purpose of enforcing the security interest that was created earlier, is legally permissible. That the respondent no. 1 is the successor-in-interest of the respondent no.2, which was not a “financial institution” at the material time would make no difference insofar as consequence in law is concerned.”

“the action taken by the respondent no.1 to issue demand notice under section 13 (2) of the SARFAESI Act as well as to approach the magistrate under section 14 is legal and valid and it cannot be invalidated based on the decision of this Court in Kotak Mahindra Bank Ltd. (supra).”

“If indeed the provisions of the SARFAESI Act can be applied even in respect of loan agreements entered into before such enactment was brought into force, we see nothing in any law to hold that the provisions thereof can never be resorted to by a bank like the respondent no.1 in circumstances such as the present. Upon noticing default being committed, the account of the petitioners was classified as a nonperforming asset by the respondent no.1. The rights of the respondent no.2 enforceable against the petitioners for default in payment of debt having passed on to it, the respondent no.1 did have the authority or sanction in law to resort to the provisions of the SARFAESI Act. Applying the parameters as laid down in paragraph 18 of the decision in M. D. Frozen Foods Exports Pvt. Ltd. (supra), since accepted in Indiabulls Housing Finance Limited (supra), we find that all such parameters in the present case are fulfilled.”

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