INDIABULLS HOUSING FINANCE LIMITED versus M/S. DECCAN CHRONICLE HOLDINGS LIMITED AND OTHERS

Citation: [2018] 1 S.C.R. 1096 · Decided: 23-02-2018 · Supreme Court of India · Bench: A.K. SIKRI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 5 · see the full citation network in Lexace

Judgment (excerpt)

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1096
SUPREME COURT REPORTS
[2018] 1 S.C.R.
INDIABULLS HOUSING FINANCE LIMITED
v.
M/S. DECCAN CHRONICLE HOLDINGS LIMITED
AND OTHERS
(Civil Appeal No. 18 of 2018)
FEBRUARY 23, 2018
[A. K. SIKRI AND ASHOK BHUSHAN, JJ.]
Securitisation and Reconstruction of Financial Assests and
Enforcement of Security Interest Act, 2002:
ss.2(1)(f), 2(1)(zb), 2(1)(zf) and 2(1)(zd), and 13(1) and (4)
– Loan granted to respondent (borrower) – By a non-financial
company (not covered under 2002 Act) – The company  subsequently
merged with appellant-company (a financial company covered by
2002 Act) – For recovery of loan initiation of proceedings under
2002 Act – Held by High Court that the provisions of 2002 could
not be invoked because the company which had granted the loan
was not covered by 2002 Act at the time of granting loan – On
appeal, held: On sanction of the scheme of merger/amalgamation,
all loans, recoveries, security, interest, financial documents etc. in
favour of the predecessor company got transferred to and stood
vested in the appellant-company – Thus, the borrowers became the
borrowers of the appellant-company – The debt with underlying
securities was the asset of the predecessor company got it had right
to transfer/assign its assets to any person without seeking consent
of the borrower – Therefore, respondent would be treated as
‘borrower’; arrangement would be classified as ‘security
arrangement’; the  agreements created ‘security interest’ and
appellant became ‘secured creditor’ under 2002 Act.
s.13(1) and (4) – Proceedings under – Whether barred if case
filed u/s. 9 of  Arbitration Act, invoking arbitration clause – Held:
2002 Act being a special enactment and Arbitration Act being a
statute of general nature, 2002 Act will be placed on higher pedestal
– Merely because steps are taken under general law, remedy under
special stature cannot be foreclosed – Arbitration and Conciliation
Act, 1996 – s.9.
                                      [2018] 1 S.C.R. 1096
          1096
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1097
Allowing the appeal, the Court
HELD: 1. Proceedings under the Securities and
Reconstruction of Financial Assests and Enforcement of Security
Interest Act, 2002 (SARFAESI Act) are to be placed on high
pedestal. SARFAESI Act is a special enactment which was enacted
by the Parliament to provide speedy remedy to the banks and
financial institutions without recourse to the court of law.  On the
other hand, the Arbitration and Conciliation Act, in contrast, is a
statute of general nature.  Merely because steps are taken under
this general law would not mean that remedy under the special
statute is foreclosed. [Para 11] [1105-A-C]
Transcore v. Union of India & Anr.  [2006] 9 Suppl.
SCR 785 : (2008) 1 SCC 125 – relied on.
2.1 The loan/debts/financial assets stood vested in the
appellant pursuant to the amalgamation scheme filed by the two
companies under Sections 391 and 394 of the Companies Act,
1956 whereunder the predecessor company got amalgamated with
the appellant. On sanction of the scheme of amalgamation, all
loans, recoveries, security, interest, financial documents, etc. in
favour of the predecessor company got transferred to and stood
vested in the appellant including the loans given by the
predecessor company to respondent borrowers, debts
recoverable by the predecessor company from respondent
borrowers, security documents executed by respondent
borrowers in favour of the predecessor company, etc.  On the
sanctioning of the scheme, the respondent borrowers became
the borrowers of the appellant as if the financial assistance was
granted by the appellant to the respondent borrowers. [Paras 33
and 34] [1121-E-F; 1120-G-H]
Saraswati Industrial Syndicate Ltd. v. Commissioner of
Income Tax [1990] Suppl. SCR 332 : (1990) Suppl.
SCC 675 – relied on.
2.2 The debt with underlying securities is the asset of the
predecessor company and that the predecessor company had right
to transfer/assign its assets to any person without seeking consent
of the borrower.  Such transfer/assignment is recognized. [Para
35] [1121-G]
INDIABULLS HOUSING FINANCE LIMITED v. M/S. DECCAN
CHRONICLE HOLDINGS LIMITED
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1098
SUPREME COURT REPORTS
[2018] 1 S.C.R.
ICICI Bank Limited v. Official Liquidator of APS Star
Industries and others [2010] 12 SCR 644 : (2010) 10
SCC 1 – relied on.
2.3  It is too farfetched to say that just to realise the dues
from the respondents, the predecessor company and the appellant
devised the plan of merger 

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