Case Note & Summary
The petitioner, Alpha and Omega Diagnostics India Ltd., challenged a common order of the Debt Recovery Appellate Tribunal (DRAT) which upheld the order of the Debt Recovery Tribunal (DRT) allowing an amendment application filed by the respondent, Asset Reconstruction Company (India) Ltd. (Arcil). The original recovery application (OA No.89 of 2005) was filed by Oriental Bank of Commerce against the petitioner for recovery of dues. Subsequently, the bank assigned its rights, title, and interest in the debt to Arcil under an assignment agreement dated 27 June 2008, pursuant to Section 5 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Arcil filed an application (Exhibit 188) before the DRT seeking amendment of the cause title to substitute itself as the applicant in place of the bank. The petitioner opposed the application, arguing that the assignment did not entitle Arcil to continue the proceedings without filing a fresh application. The DRT allowed the amendment, and the DRAT dismissed the petitioner's appeal. The High Court considered the provisions of the SARFAESI Act, particularly Section 5 which deems the assignee to have all rights and remedies of the original lender, and Section 13 which enables the assignee to enforce security interest. The court also referred to Order 22 Rule 10 of the Code of Civil Procedure, 1908, which allows substitution of an assignee in pending proceedings. The court held that the assignment under the SARFAESI Act is a statutory assignment that transfers all rights, including the right to continue pending proceedings. The amendment sought was merely to reflect the change in the applicant's name and did not alter the nature of the claim. The court found no infirmity in the DRT's order and dismissed the writ petition, upholding the substitution of Arcil as the applicant in the pending recovery proceedings.
Headnote
A) Banking Law - Assignment of Debt - Substitution of Assignee - Sections 5, 13 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) - Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) - The issue was whether an asset reconstruction company, as assignee of a debt from a bank, could be substituted in pending recovery proceedings before the DRT. The court held that the assignment under Section 5 of the SARFAESI Act transfers all rights and remedies of the original lender to the assignee, and the assignee is entitled to continue the pending proceedings without filing a fresh application. The DRT's order allowing amendment of the cause title was upheld. (Paras 1-10) B) Civil Procedure - Amendment of Pleadings - Substitution of Party - Order 22 Rule 10 of Code of Civil Procedure, 1908 (CPC) - The court held that an assignee of a debt can be substituted as a party in pending proceedings under Order 22 Rule 10 CPC, which applies to proceedings before the DRT. The amendment of the cause title to reflect the assignee as the applicant is permissible and does not change the nature of the claim. (Paras 5-10)
Issue of Consideration
Whether an assignee of a debt under the SARFAESI Act can be substituted in place of the original applicant in pending recovery proceedings before the Debt Recovery Tribunal without the need for a fresh application.
Final Decision
The High Court dismissed the writ petition, upholding the orders of the DRT and DRAT. The court held that the assignment under Section 5 of the SARFAESI Act transfers all rights and remedies to the assignee, and the assignee is entitled to continue pending proceedings. The amendment of the cause title was permissible and did not change the nature of the claim.
Law Points
- Assignment of debt
- Substitution of party
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
- 2002
- Section 5
- Section 13
- Recovery of Debts Due to Banks and Financial Institutions Act
- 1993
- Section 19
- Order 22 Rule 10 CPC
- Amendment of pleadings
