Case Note & Summary
The petitioners, Mr. Manoj D. Kapasi and Ruby Coach Building Company, owed Rs.3,64,78,000 to respondent No.2 bank. The bank issued a notice under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 on 3rd August 2002, and upon non-compliance, took possession of the secured assets (land and plant at Marol, Mumbai) under Section 13(4) on 6th December 2002. The bank then issued a public auction notice on 19th June 2004 for auction on 30th July 2004. The petitioners filed an appeal under Section 17 before the Debt Recovery Tribunal (DRT) challenging the Section 13(2) notice, but the DRT rejected their interim stay application on 22nd July 2004. They then filed Writ Petition Lod.No.2124 of 2004, in which a Division Bench passed an order on 30th July 2004 based on minutes, whereby the petitioners gave an undertaking to pay Rs.50 lakhs to the bank. However, the petitioners failed to comply with this undertaking. Subsequently, the bank proceeded with the auction and sold the property to respondent No.4. The petitioners then filed the present writ petition challenging the auction notice and the sale. The court held that since the petitioners did not challenge the possession taken under Section 13(4) and failed to comply with the undertaking, they had waived their right to challenge the auction. The petition was dismissed as not maintainable.
Headnote
A) Securitisation - Enforcement of Security Interest - Section 13(4) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 - Waiver - Petitioners failed to pay Rs.50 lakhs as per undertaking given to court and did not challenge the possession taken under Section 13(4) - Held that the right to challenge the auction notice is waived and the petition is not maintainable (Paras 2-5).
Issue of Consideration
Whether the petitioners are entitled to challenge the auction notice and possession under the Securitisation Act after failing to comply with the undertaking given to the court and after the bank had taken possession of the secured assets.
Final Decision
The writ petition is dismissed. No order as to costs.
Law Points
- Waiver of right to challenge SARFAESI proceedings
- Non-compliance with undertaking
- Maintainability of writ petition after possession
- Section 13(4) of Securitisation Act
- 2002
Case Details
2005 LawText (BOM) (01) 140
Writ Petition No.50 of 2005
H.L. Gokhale, S.C. Dharmadhikari
Mr. T.N. Subramaniam with Mr. Snehal Shah for petitioners; Dr. Ashok Bathija with Suresh Kumar and D.A. Dubey for respondent No.1; Mr. Prakash Shah with Mr. Mehta for respondent No.2; Mr. D.D. Madan with Milind Vasudeo and Ms. Soumya Srikrishna for respondent No.4; Mr. J.J. Bhatt with Mr. Rao for intervenor.
Mr. Manoj D. Kapasi & Anr.
The Union of India & Ors.
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Nature of Litigation
Writ petition challenging auction notice and sale under the Securitisation Act.
Remedy Sought
Petitioners sought to challenge the auction notice dated 19th June 2004 and the subsequent sale of secured assets.
Filing Reason
Petitioners failed to pay the outstanding loan amount and the bank took possession and issued auction notice.
Previous Decisions
DRT rejected interim stay on 22nd July 2004; earlier writ petition (Lod.No.2124 of 2004) resulted in an order based on minutes where petitioners gave undertaking to pay Rs.50 lakhs.
Issues
Whether the petitioners can challenge the auction notice after failing to comply with the undertaking to pay Rs.50 lakhs.
Whether the petition is maintainable when the petitioners did not challenge the possession taken under Section 13(4).
Submissions/Arguments
Petitioners argued that the auction notice was illegal and sought to challenge it.
Respondents argued that the petitioners had waived their right by not challenging the possession and by failing to comply with the undertaking.
Ratio Decidendi
A borrower who does not challenge the possession taken under Section 13(4) of the Securitisation Act and fails to comply with an undertaking given to the court to pay a part of the dues waives the right to challenge the subsequent auction notice and sale.
Judgment Excerpts
The petitioners had given an undertaking to pay the second respondent an amount of Rs.50 lakhs... The petitioners have not complied with that undertaking.
The petitioners did not challenge the possession taken under Section 13(4)... In these circumstances, the petitioners have waived their right to challenge the auction.
Procedural History
Bank issued Section 13(2) notice on 3rd August 2002; took possession under Section 13(4) on 6th December 2002; issued auction notice on 19th June 2004; petitioners filed appeal under Section 17 before DRT, interim stay rejected on 22nd July 2004; filed W.P. Lod.No.2124 of 2004, order on 30th July 2004 with undertaking to pay Rs.50 lakhs; petitioners failed to pay; bank sold property to respondent No.4; petitioners filed present writ petition.
Acts & Sections
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: 13(2), 13(4), 17
