Recourse on recovery notice by bank for a facility provided under cgtmse
Deepak Vanjare
(Querist) 02 October 2011
This query is : Resolved
Bank had sanctioned Bank guarantee of Rs 26.65 Lacs to sme by keeping margin of Rs 6.65 lacs in fixed deposit under cgtmse.The BG was invoked & Bank paid all the amount to beneficiary after recovery of margin money.For the balance amount Rs 20 lacs bank has issued recovery notice. Thr Sme unit has existing working finance secure under a collateral security. Can bank recover the dues by issuing notice under sarfesi act against assets which were not linked for the facility under cgtmse where no collateral or third party guarantee has been given.What is the recourse available for the sme in this case.
Biswanath Roy
(Expert) 02 October 2011
According to my opinion Sarfesi act is Ultra-virus.Recovery of loan money can be challenged in the state high court.I have a successfull record in conducting such a case in the Calcutta high court.
prabhakar singh
(Expert) 02 October 2011
In view of comment of Mr. Biswanath Roy i prefer to keep mum since i never prefer to preach my engagement on any ground.
R.Ramachandran
(Expert) 02 October 2011
Dear Mr. Biswanath,
Do you mean to say that you have succeeded in getting the SARFAESI Act declared as ultra-vires? It is a news to me. Can you please share the citation please?
As regards the query of Mr. Deepak, one has to see what are the terms and conditions of the Bank Guarantee (rather under what terms the Bank Guarantee was given by the Bank.)
ajay sethi
(Expert) 02 October 2011
we are not aware of any judgement wherein SARFAESI act has been declared ultravires.
i agree with ramchandran depends upon terms of bank guarantee
Raj Kumar Makkad
(Expert) 02 October 2011
If terms of guarantee cover only the mortgaged properties the n bank cannot take possession and accordingly auction properties under this Act but certainly the right of recovery of bank is not frustrated in any way and it can go ahead as per provisions.
R.Ramachandran
(Expert) 03 October 2011
Dear Mr./ Biswanath Roy,
Can you indicate the citation of the case where you got the SARFAESI Act declared ultra vires?
Biswanath Roy
(Expert) 04 October 2011
Mr Ramachandran
please contact me 9836858000
R.Ramachandran
(Expert) 04 October 2011
I contacted Mr. Biswanath. He says according to his opinion the Sarfaesi Act is ultra-vires. He has challenged the same in the Calcutta High Court and the matter is pending, and he is confident that it will be declared ultra-vires by the court!
ajay sethi
(Expert) 04 October 2011
mr ramchandran
drtsarfaesi.blogspot.com/.../sarfaesi-proceeding-jurisdiction-of.html
Despite the effort made by the legislature to keep the recovery of debts by the Bank very simple and clear when the debt is secured, there exist few complications in law dealing with the recovery of secured debt under SARFAESI Act, 2002. The constitutional validity of the provisions of the SARFAESI Act were challenged before the Constitutional Courts and the courts have made it very clear that SARFAESI Act, 2002 is constitutionally valid though certain provisions required a re-look. Initially, when the act came to force, many writ petitions were filed challenging the action initiated by the Bank under the provisions of SARFAESI Act, 2002 and even a notice under section 13 (2) of the Act was challenged before the High Court in many cases. But, slowly, the practice has changed and the constitutional courts now exercise restraint when a writ petition is filed challenging the action initiated by the Bank under SARFAESI Act, 2002.
ajay sethi
(Expert) 04 October 2011
Challenge to the constitutional validity of the provisions of the Securitisation Act is rejected in view of the decision of the Supreme Court in Mardia Chemicals Limited vs. Union of India, 2004 (2) CTC 759 : 2004 (4) SCC 311. (2) Whether the challenge is to the notice under Section 13 (2) of the Securitisation Act, this challenge is rejected on the ground of alternative remedy of filing a reply to the said notice which will be considered by the secured creditor and decided by a reasoned order. (3) Where the challenge is to the action under Section 13 (4) of the Securitisation Act, this challenge is also rejected on the ground of alternative remedy of filing application under Section 17 of the Securitisation Act. (4) Challenge to the fee for filing application under Section 17 is also rejected.
R.Ramachandran
(Expert) 04 October 2011
Dear Mr. Sethi,
I do agree with you. But when Mr. Biswanath was mentioning that the said Act was ultra-vires, I was wondering in decision declared the same as ultra-vires.
Thanks for your inputs.
Biswanath Roy
(Expert) 08 October 2011
I feel it is my pleasure that so many learned friends opined about SARFASI ACT. I need add further that to understand whether an act is ultra virus or not one should consider the doctrine of ultra virus including its adoption by U.S. court, Craies Statutory law, its development in India and some other decisions of Supreme Court of India relating to competence of the legislative authority and their actions in excesses touching Article 14 of the Constitution of India.
Surfasi Act is not redundant.
