SARFAESI Act is a Complete Code and there is no Lacuna or Ambiguity to warrant reading something more into it; SC [Read Judgment]
There is no plausible reason as to take recourse to any provisions of the Companies Act and permit interference in the proceedings under the SARFAESI Act either by the Company Judge or the liquidator, the Court said.
The Supreme Court, has held that the Company Judge cannot interfere in a proceedings by a secured creditor to realize its secured interests as per provisions of the SARFAESI Act. Apex Court bench comprising of Justices Vikramajit Sen and Shiva Kirti Singh, in Pegasus Assets Reconstruction P. Ltd. Vs. M/s. Haryana Concast Limited has settled the legal position in this regard.
The appeals arise from two conflicting decisions of two High Courts. The Punjab and Haryana High Court had upheld the view of Company Court and approved of certain fetters placed upon secured creditors whereas the Delhi High Court held that the company judge or the official liquidator cannot have any say in the sale of secured assets by the secured creditors under the SARFAESI Act.
Intervention of court on sale proceedings contrary to spirit of SARFESI Act
The Apex Court observed that the Punjab and Haryana High Court erred in holding that there is no inconsistency between the Companies Act and the SARFAESI Act if the Company Judge issues supervisory directions to achieve the object of Section 529A of Companies Act which finds a clear mention in one of the provisos of Section 13(9) of the SARFAESI Act. The court quoted in approval the following views of Delhi High Court in this regard.
The Delhi High Court answering the issue had said ‘If it were to be held that the Official Liquidator (who acts under the dictates of the Company Court) is to be also associated with the sale, it will naturally open up the fora of the Company Court also for entertaining matters relating to such sale and which as aforesaid is not only likely to lead to conflicts but is also contrary to the spirit of the SARFAESI Act of sale being without the intervention of the Court.”
SARFAESI Act itself takes care of interest of workers
The Court observed that sufficient provisions under the SARFAESI Act and the Rules are there to protect the interest of workers and to realize their dues and no order is required by the Company Judge for association of the Official Liquidator. The Court added that if Official Liquidator is not satisfied with the decisions or steps taken by the secured creditor or the authorized officer, at appropriate stage it has sufficient opportunity to avail right of appeal under Section 17 of the SARFAESI Act before the Debts Recovery Tribunal. There is right of further appeal under Section 18 also.
If the view taken by Punjab & Haryana High Court in Pegasus is accepted, there shall be a conflict of rights and interest of the secured creditor who have the right and liberty to realize their secured interest in accordance with the provisions of the SARFAESI Act on one hand, and the statutory rights and liability of the Official Liquidator acting under the orders of the Company Judge as per provisions of the Companies Act, on the other. The appellate fora shall also differ, leading to a situation of uncertainty and conflict between the two Acts, the Bench said.
Non-intervention of Court is intention behind SARFAESI Act.
The Court also said that the intention of the Parliament, as evident from Section 13 of the SARFAESI Act, is that a secured creditor has the right to enforce its security interest without the intervention of the court or tribunal and the Act takes care that in case of grievance, the borrower, which in the case of a company under liquidation would mean the liquidator, will have the right of seeking redressal under Sections 17 and 18 of the SARFAESI Act.
No lacuna/ambiguity in SARFAESI Act
The Court also said that there is no lacuna or ambiguity in the SARFAESI Act to warrant reading something more into it. For the purpose it has been enacted, it is a complete code and the earlier judgments rendered in the context of SFC Act or RDB Act vis-à-vis the Companies Act, cannot be held applicable on all force to the SARFAESI Act. There is nothing lacking in the Act so as to borrow anything from the Companies Act till the stage the secured assets are sold by the secured creditors in accordance with the provisions in the SARFAESI Act and the Rules, the Bench said.
Read the Judgment here.