Parties are entitled to reopen the proceedings and continue the same from the stage where they were suspended

Lahari Gurrala | Symbiosis Law School, Hyderabad | 11th January 2020

M/S RUCHI ENTERPRISES AND ORS. vs M/S FULLERTON INDIA CREDIT COMPANY LTD W.P.(C) 2744/2019

Facts of the Case:

• Petitioners had availed two loan facilities to the tune of Rs.1,80,00,000/- and Rs.24,00,000/- and secured the said loan by creating mortgage of the aforesaid property. The petitioners defaulted in the payment of the loan and, consequently, the respondent issued a notice under Section 13(2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”). 
• On 14.06.2017, the petitioners preferred a securitisation application under Section 17 of the SARFAESI Act before the Tribunal. While the said application was pending, the parties entered into a Memorandum of Understanding on 17.01.2018. 
• Under the MOU, the petitioners represented that they will, on execution of MOU, make the payment of the outstanding amounts in EMIs of Rs.7,21,836/-, and the other charges and receiver fee amount of Rs.2,92,179/- within six months, and the respondent/lender agreed not to proceed under the SARFAESI Act subject to receiving the aforesaid payment of Rs.7,21,836/- along with the sum of Rs.2,92,179/-, and payment of all future EMIs regularly by the petitioners/borrowers. 
• It was also agreed between the parties that the securitisation application filed by the petitioners be disposed of in terms of the MOU. 

Clause 5 of the MOU provided that:- 

 That the parties herein agree that in case of any default in repayment of the amount as agreed. The borrowers shall surrender the peaceful possession of secured asset to the lender and on failure to so the lender may proceed in accordance with law and provisions of SARFAESI Act, 2002.” 

• Admittedly, the petitioners once again defaulted and did not make payment of the instalments, as agreed under the MOU. It appears that the respondent, therefore, sought to proceed further under the SARFAESI Act by approaching the learned CMM for appointment of receiver to take possession of the aforesaid property. 
• It is then the petitioner moved the fresh securitisation application along with an interim application on which the impugned order was passed by the learned Debt Recovery Tribunal-I on 06.03.2019 
• The learned Debt Recovery Tribunal had dismissed the application of interim relief on the ground that the said application came to be moved at the last moment, since notice for taking over possession had been issued by the receiver on 11.02.2019 and was received by the petitioners on 18.02.2019. However, the petitioners had moved the SA along with the interim application at the last moment on 05.03.2019 
• It was observed that the petitioners have not availed the statutory remedy available to them under Section 18 of the SARFAESI Act. The only reason given by the petitioners is that to move such an appeal, they would be required to deposit 50% of the outstanding liability. It was also so observed, that is no ground not to approach the DRAT to avail of the statutory remedy available under the Act. 
• It was submitted by the Counsel for the Respondents that the petitioners have concealed–both from the DRT as well as from this Court, the notice dated 12.12.2018 issued to the petitioners on account of their failure to adhere to the terms of the MOU. By the said communication the petitioners were informed that since they had not adhered to the terms of the MOU, the same had been rendered null and void. The petitioners had been called upon to make payment of the outstanding amount of Rs.1,84,21,754.03, or to surrender the possession of the secured assets within seven days of the notice, failing which the respondent would take steps for taking over possession of the secured assets under the SARFAESI Act 
• The submission of the learned counsel for the petitioners is that without issuing a fresh notice under Section 13(2) of the SARFAESI Act, the respondent could not have proceeded to straightaway seek appointment of the receiver to take over possession of the property. 

Issue:

• Whether the Respondents can re-open the previous proceeding or should they issue a fresh notice to the petitioners under Section 13(2) of SARFAESI Act?

Held:

• It was held that not only in terms of the MOU, but also in terms of the provisions of the Act, the respondent was entitled to reopen the proceedings under the SARFAESI Act and continue the same from the stage where they were suspended on account of the parties entering into the MOU, once the terms of the MOU were not adhered to by the petitioners/borrowers.
• For the aforesaid reasons, the court dismissed the present petition with costs of Rs.10,000/- to be deposited with the Prime Minister National Relief Fund with four weeks.