Case Note & Summary
The petitioner, Nouveaw Exports Private Limited, filed a writ petition under Article 226 of the Constitution of India challenging the order dated 13th January 2010 passed by the Appellate Authority for Industrial & Financial Reconstruction (AAIFR), New Delhi, which rejected its prayer for interim relief during the pendency of an appeal before the AAIFR. The petitioner had appealed against the order of the Board for Industrial and Financial Reconstruction (BIFR) dated 7th January 2009. The background of the case involves Respondent No.5, a bank, which claimed to be the sole secured creditor of Respondent No.3, a borrower company. A reference was pending before BIFR for revival of Respondent No.3. During those proceedings, Respondent No.5 invoked the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Securitisation Act) and sold the movable and immovable properties of Respondent No.3 in a public auction in July 2008. The sale was confirmed by the Debt Recovery Tribunal (DRT), and possession was handed over to Respondent No.7. The petitioner, claiming to have a business conducting agreement with Respondent No.3 and being an unsecured creditor, moved BIFR seeking directions to restrain the bank from proceeding under the Securitisation Act and to allow the petitioner to remove its stock, equipment, and machinery from the Vashi plant. BIFR rejected this application on 7th January 2009, holding that since the sale was completed and action under Section 13(4) of the Securitisation Act had been taken to its logical end, BIFR had lost jurisdiction. The petitioner appealed to AAIFR and sought interim relief for status quo. AAIFR rejected the interim relief, reasoning that the sale was concluded long back and action under Section 13(4) had reached its logical end, so it was not open to interdict the process. The High Court, after hearing counsel, noted that the sale had been completed and possession delivered, and the petitioner had not challenged the sale before the appropriate forum. The court held that the AAIFR's order refusing interim relief was justified and that the writ petition was not maintainable as the appeal was still pending. The court dismissed the petition, observing that no interference was warranted under Article 226.
Headnote
A) Industrial Finance - BIFR Jurisdiction - Loss of Jurisdiction - Section 13(4) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Once the secured creditor has taken action under Section 13(4) to its logical end, including sale of assets and delivery of possession, the BIFR loses jurisdiction over the company's case. The court held that the sale having been completed and confirmed by DRT, no interim relief could be granted to disturb the concluded transaction. (Paras 2-4) B) Interim Relief - Discretion of Appellate Authority - Article 226 of Constitution of India - The High Court declined to interfere with the AAIFR's order rejecting interim relief, as the sale was concluded long back and the petitioner had not challenged the sale before appropriate forum. The court held that the writ petition was not maintainable as the appeal was still pending before AAIFR. (Paras 4-5)
Issue of Consideration
Whether the Appellate Authority for Industrial & Financial Reconstruction (AAIFR) erred in rejecting the prayer for interim relief during the pendency of appeal against BIFR order, and whether the High Court should interfere under Article 226 of the Constitution.
Final Decision
The High Court dismissed the writ petition, holding that the AAIFR's order rejecting interim relief was justified as the sale was concluded and BIFR had lost jurisdiction. No interference under Article 226 was warranted.
Law Points
- BIFR loses jurisdiction once action under Section 13(4) of Securitisation Act is taken to its logical end
- sale completed and possession delivered
- interim relief cannot be granted to disturb concluded sale
- writ petition under Article 226 not maintainable against order refusing interim relief when appeal is pending before AAIFR.
