LexM. D. FROZEN FOODS EXPORTS PVT. LTD. & ORS. versus HERO FINCORP LTD.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2017] 13 S.C.R. 800
A
M. D. FROZEN FOODS EXPORTS PVT. LTD. & ORS.
B
v.
HERO FINCORP LTD.
(Civil Appeal No.l5147 of2017)
SEPTEMBER 2 I, 2017
[R. F. NARIMAN AND SANJAY KISHAN KAUL, JJ.]
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act) -
C
ss.2(l)(m)(iv),(o),(zd) and 13(2), 31A, 35, 37- Simultaneous
proceedings for recovery under the Arbitration and Conciliation
Act, 1996 and the SARFAESI Act - Permissibility of- Appellants
borrowed monies from respondent, against security of immovable
properties by creating equitable mortgage of seven properties -
Account of appellants became a 'Non-Pe1jorming Asset' ('NPA ') -
D
Agreement between the parties contained an arbitration clause and
thus, the lender/respondent invoked arbitration clause - Prior to
such invocation, a notification was issued specifying 'Non-Banking
Financial Companies' as financial institutions and directing that
provisions of SARFAESI Act shall apply to such financial institutions
E
- Respondent, a Non-Banking Financial Company was notified as
a financial institution - Respondent issued a notice uls. 13(2),
SARFAESI Act for one of the seven properties of the appellants - In
the arbitration proceedings, interim orders granted by the Arbitrator
restraining appellant from creating any third party interest over the
properties - Another notice issued by respondent u!s.13(2),
F
SARFAESI Act for two more properties of the appellant - Interim
order passed in arbitration proceedings, later confirmed- In order
to remove any impediment in the SARFAESI proceedings, application
filed by respondent to substitute the order of status quo qua parties
with the name of the appellants/borrowers- Application allowed-
G Appeal filed by appellants u/s.37(2){b), Arbitration Act, dismissed
by High Court - Plea of appellants before Supreme Court that
respondent elected its remedy by seeking recovery through
arbitration process and, thus, could not subsequently and
simultaneously initiate proceedings under SARFAESI Act - Held:
The present is not a case of election of remedies - Provisions of the
H
800
M. D. FROZEN FOODS EXPORTS PVT. LTD. v. HERO
801
FINCORP LTD.
SARFAESI Act are a remedy in addition to the provisions of the A
Arbitration Act. 1996 - SARFAESI proceedings and arbitration
proceedings. thus, can go hand in hand - Impugned order is well-
reasoned order giving cogent reasons- Costs ofRs. 20,000/- imposed
- Arbifration and Conciliation Act, 1996- s.37(2}(b) -Recovery
of Debts Due to Banks and Financial Institutions Act. 1993 -
Banking/Banks.
Securitisation and Reconstruction of Financial Assets and
Enjorcement of Security Interest Act, 2002- History of- Discussed.
B
Securitisation and Reconstruction of Financial As.wts and
Enforcement of Security Interest Act, 2002 - s.2(f) - Remedy llnder c
- Nature of- Substantive or procedural - Loan borrowed by
appellants- Account of appellants became a 'Non-Performing Asset'
('NPA ') - Said loan was borrowed by appellants, prior to the
application of the SARFAESI Act to the respondent - Plea of
appellants that it was impermissible for respondents to take recourse
to provisions of SARFAESI Act in respect of an account already D
declared an NPA, as that would amount to retrospective application
of a substantive law - Held: Scheme of SARFAESJ Act sets out an
expeditious, procedural methodology, enabling the bank to take
possession of the property for non-payment of dues, without
intervention of the court - Mere fact that a more expeditious remedy
is provided under the SARFAESI Act, does not mean that it is
substantive in character or has created an altogether new right -
Scheme of the SARFAESI Act, is really to provide a procedural remedy
against securit)J interest already created- Therefore, an existing
borrower, who was granted financial assistance was covered u/s.2(/)
as a 'borrower' - Thus, SARFAESI Act applies to all existing
agreements irrespective of the fact whether the lender was a not{fied
'jlnancial institution' on the date of the execution of the agreement
with the borrower or not - Interpretation of Statutes.
E
F
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 - Whether parallel G
recovery proceedings could go on under the RDDB Act; 1993 and
the SARFAESJ Act! 2002 - Held: The two Acts are complimentary to
each other and simultaneoExcerpt shown. Read the full judgment & AI analysis in Lexace.