Sanjay Dhingra vs IDBI Bank WPC 8131 of 2020
Facts:
1) Respondent no.3-company, which is based in Dubai and has its registered office in Delhi, availed the said loan facilities from the Dubai Branch of IDBI Bank. In this regard, a Facility Agreement dated 04th December, 2012 was entered between the respondent no.2-bank and respondent no.3-company situated in Dubai.
2) The terms of the amended Sanction Letter dated 14
3) pursuant to the proceedings initiated by respondent no.1-bank under the SARFAESI Act, vide CC No. 47/4, the learned CMM (West), Tis Hazari Court, vide his order dated 12th March, 2020, appointed a Receiver for taking over physical possession of the secured asset. Subsequently, by order dated 24th September, 2020, the learned CMM (West), Tis Hazari Court, extended the time period for the Receiver to take possession of the secured asset.
3) Pursuant to the proceedings initiated by respondent no.1-bank under the SARFAESI Act, vide CC No. 47/4, the learned CMM (West), Tis Hazari Court, vide his order dated 12th March, 2020, appointed a Receiver for taking over physical possession of the secured asset. Subsequently, by order dated 24th September, 2020, the learned CMM (West), Tis Hazari Court, extended the time period for the Receiver to take possession of the secured asset.
4) Pursuant to the aforesaid, the Court Receiver issued Possession Notices dated 19th March, 2020 and 03rd October, 2020, pursuant to which, physical possession of the property in question/secured asset, was taken over by the respondent no.1-bank.
Issue: Petition is filed challenging the above decision
Arguments:
Petitioner:
1) Counsel submitted that respondent no.2-bank, which has sanctioned and disbursed the financial facility to the respondent no.3-company, and against which security has been created by the petitioner in favour of respondent no.2- bank, are not situated in India. Accordingly, the provisions of the SARFAESI Act cannot be invoked by the respondent no.1-IDBI, New Delhi, on behalf of respondent no.2-IDBI, Dubai, as there is no debt due to the respondent no.2 under the Indian Law.
2) Counsel submitted that Section 5(c) of the Banking Regulation Act, 1949, the respondent no.2 is not a banking company in India, as respondent no.2 is not having any business in India. Accordingly, the respondent no.1 cannot initiate provisions of the SARFAESI Act on behalf of respondent no.2-bank, against the property of the petitioner.
3) It was further submitted that agreement explicitly stipulated that the said agreement shall be governed and construed in accordance with the law of the UAE. Thus, Indian laws do not govern the transaction, but the laws of UAE govern it. Therefore, the respondent-banks have no authority or jurisdiction to proceed under the provisions of the SARFAESI Act.
4) The personal insolvency proceedings under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 (“IBC”), has been initiated by the Union Bank of India against the petitioner herein, before National Company Law Tribunal (“NCLT”), New Delhi, which is registered as Case No. IB276/(ND)/2021. Thus, in terms of Section 96(1) of IBC, 2016, proceedings pending in respect of any debt, shall be deemed to have been stayed.
Respondent:
1) Counsel submitted that instant petition is not maintainable before this Court. The petitioner is challenging the orders passed by the learned MM under Section 14 of the SARFAESI Act and the consequent notices issued by the Court Receiver. Under the SARFAESI Act, where a debt becomes due, the bank is empowered to take steps to seek enforcement of their security interest under Section 13 of the SARFAESI Act
2) Counsel submitted that petitioner had approached this Court primarily on the ground that since the loan was issued from the Dubai Branch, proceedings under the SARFAESI Act would not be maintainable. In similar circumstances, Bombay High Court has already held that these issues ought to be properly agitated under Section 17 of the SARFAESI Act, before the Debt Recovery Tribunal (“DRT”).
3) The actual physical possession of the property has already been taken by the bank on 17th October, 2020. The proceedings under the IBC, 2016, against the petitioner, commenced only in June, 2021. Therefore, all the actions qua the property in question, have been taken, prior to the initiation of proceedings under the IBC, 2016.
Decision: Hon’ble HC allowed the petition.
Rationale:
1) HC held that in terms of the law of the land, any legal action or proceeding pending in respect of any debt of the petitioner, shall be deemed to have been stayed, upon commencement of the interim moratorium in terms of Section 96 of IBC, 2016.
2) Thus, in view of the aforesaid, it is manifest that the moratorium imposed under Section 96 of IBC, 2016, would apply to the security interest created by an individual, under the personal guarantee. Therefore, after commencement of the insolvency proceedings under the IBC, 2016, against the petitioner, in his capacity as a personal guarantor with respect to default of a loan account, the interim moratorium shall be applicable to all the debts, including the debt owed by the petitioner to the respondent-bank, in his capacity as a personal guarantor, for which property in question was mortgaged by the petitioner, against which SARFAESI proceedings have been initiated by the respondent-bank.
3) It held that mere fact that possession of the property in question has been taken over by the respondent-bank under SARFAESI proceedings, prior to the commencement of IBC proceedings against the petitioner, would have no effect on the interim moratorium that becomes applicable in terms of Section 96 of IBC, 2016. The applicability of interim moratorium under IBC, 2016, on the proceedings initiated by the respondent-bank under the SARFAESI Act, cannot be excluded merely because the bank has taken possession of the property in question prior to commencement of the proceedings under the IBC, 2016.
Order:
