The High Court of Andhra Pradesh allowed a petition that sought to quash the order of the Trial court which did not allow the petition to reopen and recall the crucial witnesses of the case and held that while speed is important in delivering justice it should not come at the cost of denying Investigating Officers a fair chance to present crucial evidence and highlighted the power of Criminal Courts to summon official witnesses even after the evidence stage is closed, emphasizing the importance of exercising this discretion judiciously for a just decision.
Brief Facts:
The Petitioner had obtained a loan of Rs. 5.13 crores from the Respondent, which remained unpaid, resulting in the classification of their account as a Non-Performing Asset (NPA). Subsequently, the respondent initiated Arbitration proceedings, culminating in the issuance of an Arbitral Award. Following this, the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2022 (SARFAESI) were invoked by the Bank before the Debt Recovery Tribunal (DRT), which issued a notice of auction for the Petitioners' property. Consequently, the Petitioners challenged these actions by filing a writ petition.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the petitioner contended that the loans were availed and the account was declared as NPA and later another loan was given to the petitioner, The respondent has committed a serious error in taking further steps and another loan was given on the creditworthiness of the petitioner. He also submitted that the arbitral awards passed were contrary to law and further, after an award is passed, the respondent doesn’t have a right to invoke the provisions of the SARFAESI Act. He also contended that the COVID moratorium being in place was not considered for deciding the NPA and security interest was not registered with the central registry.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent argued that a writ petition is not a proper remedy and appropriate step or proceeding is to approach the Dept Recovery Tribunal. He submits that a heavy amount is outstanding and a huge amount of loan was taken which was not repaid due to which the account was classified as NPA. He contended that extra financial assistance was given to benefit the petitioner which can’t be taken advantage of. He further contended that the procedure under the SARFAESI Act was properly followed that there is no bar for the institution to take steps under both acts and that the moratorium was given to SSI units only and not to pure commercial businesses like petitioners.
Observations of the Court:
The court observed that that court did not ex-facie find any error in the respondent invoking SARFAESI after the arbitral award was passed by the arbitrator and both the remedies are available can be simultaneously exercised by the respondents and they have a right to recover the loan outstanding and are entitled to invoke the provisions of the SARFAESI Act and also the Arbitration Act simultaneously.
The court further held that any person aggrieved by the actions taken has an effective alternative remedy and approach the Debt Recovery Tribunal and a writ is not at all an effective remedy. The court further observed that the security interest has been submitted and there is no pleading regarding the same but the lack of this registration will not also vitiate the entire proceedings.
The decision of the Court:
The court dismissed the petition.
Case Title: M/s Sri Rajaram Constructions & ors. vs IKF Finance Ltd. & ors.
Coram: Hon’ble Mr. Justice D.V.S.S. Somayajulu and Hon’ble Mr. Justice Duppala Venkata Ramana
Case No.: W.P.No.13689 of 2023
Advocate for the Applicant: Mr. Sita Ram Chaparla
Advocate for the Respondent: Mr. Sri Sreedhar Valiveti
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