Kerala High Court
Amal Mathew vs The Manager on 4 April, 2024
Author: Murali Purushothaman
Bench: Murali Purushothaman
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE MURALI PURUSHOTHAMAN
THURSDAY, THE 4TH DAY OF APRIL 2024 / 15TH CHAITHRA, 1946
WP(C) NO. 12757 OF 2017
PETITIONER:
AMAL MATHEW
AGED 40 YEARS
PROPRIETORM/S. ANNZ TVSBYEPASS
ROADMUTTATHARATHIRUVANANTHAPURAM
BY ADV
SMT.LIZA P.CHERIAN
RESPONDENTS:
1 THE MANAGER
PHOENIX ARC PRIVATE LIMITEDCIN:
U67190MH2007PTC1683035TH FLOOR, DANI CORPORATE PARK,
158CST ROADKALINA, SANTACRUZ (E), MUMBAI.
2 THE SOUTH INDIAN BANK
TVM MAIN BRANCH,SPENCER
JUNCTIONTRIVANDRUMREPRESENTED BY ITS MANAGER.
BY ADVS.
SRI.ASISH K.JOHN
SRI.K.K.JOHN
SRI. K.K. JOHN ,STANDING COUNSEL.
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
04.04.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) NO. 12757 OF 2017
: 2 :
JUDGMENT
The petitioner has filed this writ petition
challenging Ext.P2 notice of assignment of financial
assets, which was issued under Section 6 of the
Securitization and Reconstruction of Financial Assets
and Enforcement of Security Interest Act, 2002
(SARFAESI Act).
2. The petitioner had availed a housing loan
from the 2nd respondent Bank by mortgaging his
properties. Alleging default in repayment of the loan
amount, the 2nd respondent Bank initiated proceedings
under the SARFAESI Act and issued Ext.P1 notice in
exercise of powers under Section 13(4) and symbolic
possession of the secured assets was taken on
WP(C) NO. 12757 OF 2017
18.01.2017.
3. While so, the petitioner was issued with
Ext.P2 notice dated 23.03.2017 by the 2nd respondent
Bank stating that pursuant to Assignment Agreement
dated 17.03.2017, the Bank has assigned to the 1 st
respondent, an asset reconstruction company, the
financial assistance granted by the Bank to him,
together with all underlying securities, rights, title and
interest in respect thereof, in terms of Section 5 of
the SARFAESI Act. The petitioner states that before
assignment of the financial assets to the 1 st
respondent, the 2nd respondent did not issue notice to
the petitioner. It is also stated that the details of the
outstanding amount or the secured assets are not
mentioned in Ext.P2 notice. It is further stated that
WP(C) NO. 12757 OF 2017
the copy of the assignment deed is not furnished to
the petitioner. The petitioner, therefore, prays to
quash Ext.P2 and for a direction to the respondents
not to initiate coercive measures against his properties
without giving an opportunity of being heard.
4. A counter affidavit has been filed on behalf of
the 1st respondent wherein it is stated that Ext.P2 is
only an intimation issued under Section 6 of the
SARFAESI Act, informing about the assignment of the
financial assets of the Bank in favour of the 1 st
respondent. It is stated that the SARFAESI Act does
not envisage the consent of the borrower or notice
before assigning the rights to the asset reconstruction
company and that the Act also does not provide for
serving a copy of the assignment deed to the
WP(C) NO. 12757 OF 2017
borrower.
5. The 1st respondent asset reconstruction
company has acquired the financial assets of the 2 nd
respondent bank granted to the petitioner, in terms of
Section 5(1) (b) of the SARFAESI Act. Section 5 of the
SARFAESI Act reads as follows;
"Acquisition of rights or interest in
financial assets
(1) Notwithstanding anything contained
in any agreement or any other law for
the time being in force, any 3[asset
reconstruction company] may acquire
financial assets of any bank or financial
institution, --
(a) by issuing a debenture or bond or
any other security in the nature of
debenture, for consideration agreed
upon between such company and the
bank or financial institution,
WP(C) NO. 12757 OF 2017
incorporating therein such terms and
conditions as may be agreed upon
between them; or
(b) by entering into an agreement with
such bank or financial institution for the
transfer of such financial assets to such
company on such terms and conditions
as may be agreed upon between them.
[(1A) Any document executed by any
bank or financial institution under sub-
section (1) in favour of the asset
reconstruction company acquiring
financial assets for the purposes of asset
reconstruction or securitisation shall be
exempted from stamp duty in
accordance with the provisions of
section 8F of the Indian Stamp Act,
1899:
Provided that the provisions of this sub-
section shall not apply where the
acquisition of the financial assets by the
asset reconstruction company is for the
WP(C) NO. 12757 OF 2017
purposes other than asset reconstruction
or securitisation.]
(2) If the bank or financial institution is
a lender in relation to any financial
assets acquired under sub-section (1) by
the [asset reconstruction company], such
[asset reconstruction company] shall, on
such acquisition, be deemed to be the
lender and all the rights of such bank
or financial institution shall vest in such
company in relation to such financial
assets.
[(2A) If the bank or financial institution
is holding any right, title or interest
upon any tangible asset or intangible
asset to secure payment of any unpaid
portion of the purchase price of such
asset or an obligation incurred or credit
otherwise provided to enable the
borrower to acquire the tangible asset or
assignment or licence of intangible asset,
such right, title or interest shall vest in
WP(C) NO. 12757 OF 2017
the asset reconstruction company on
acquisition of such assets under sub-
section (1).]
(3)Unless otherwise expressly provided
by this Act, all contracts, deeds, bonds,
agreements, powers-of-attorney, grants
of legal
(3) representation,permissions, approvals,
consents or no-objections under any law
or otherwise and other instruments of
whatever nature which relate to the said
financial asset and which are subsisting
or having effect immediately before the
acquisition of financial asset under sub-
section (1) and to which the concerned
bank or financial institution is a party
or which are in favour of such bank or
financial institution shall, after the
acquisition of the financial assets, be of
as full force and effect against or in
favour of the 3[asset reconstruction
company] , as the case may be, and
WP(C) NO. 12757 OF 2017
may be enforced or acted upon as fully
and effectually as if, in the place of the
said bank or financial institution, 3[asset
reconstruction company], as the case
may be, had been a party thereto or as
if they had been issued in favour of
3[asset reconstruction company], as the
case may be.
(4)If, on the date of acquisition of
financial asset under sub-section (1), any
suit, appeal or other proceeding of
whatever nature relating to the said
financial asset is pending by or against
the bank or financial institution, save as
provided in the third proviso to sub-
section (1) of section 15 of the Sick
Industrial Companies (Special Provisions)
Act, 1985 (1 of 1986), the same shall
not abate, or be discontinued or be, in
any way,prejudicially affected by reason
of the acquisition of financial asset by
the [asset reconstruction company], as
the case may be, but the suit, appeal or
WP(C) NO. 12757 OF 2017
other proceeding may be continued,
prosecuted and enforced by or against
the [asset reconstruction company], as
the case may be.
(5) On acquisition of financial assets
under sub-section (1), the [asset
reconstruction company], may with the
consent of the originator, file an
application before the Debts Recovery
Tribunal or the Appellate Tribunal or
any Court or other Authority for the
purpose of substitution of its name in
any pending suit, appeal or other
proceedings and on receipt of such
application, such Debts Recovery
Tribunal or the Appellate Tribunal or
Court or Authority shall pass orders for
the substitution of the [asset
reconstruction company] in such pending
suit, appeal or other proceedings.]"
WP(C) NO. 12757 OF 2017
6. Section 6 of the SARFAESI Act reads as
follows;
"Notice to obligor and discharge of
obligation of such obligor
(1) The bank or financial institution
may, if it considers appropriate, give a
notice of acquisition of financial assets
by any [asset reconstruction company],
to the concerned obligor and any other
concerned person and to the concerned
registering authority (including Registrar
of Companies) in whose jurisdiction the
mortgage, charge, hypothecation,
assignment or other interest created on
the financial assets had been registered.
(2)Where a notice of acquisition of
financial asset under sub-section (1) is
given by a bank or financial institution,
the obligor, on receipt of such notice,
shall make payment to the concerned
[asset reconstruction company], as the
WP(C) NO. 12757 OF 2017
case may be, and payment made to
such company in discharge of any of the
obligations in relation to the financial
asset specified in the notice shall be a
full discharge to the obligor making the
payment from all liability in respect of
such payment.
(3)Where no notice of acquisition of
financial asset under sub-section (1) is
given by any bank or financial
institution, any money or other
properties subsequently received by the
bank or financial institution, shall
constitute monies or properties held in
trust for the benefit of and on behalf of
the 1[asset reconstruction company], as
the case may be, and such bank or
financial institution shall hold such
payment or property which shall
forthwith be made over or delivered to
such [asset reconstruction company], as
the case may be, or its agent duly
authorised in this behalf."
WP(C) NO. 12757 OF 2017
7. Section 5 of the SARFAESI Act provides that
an asset reconstruction company may acquire financial
assets of any bank or financial institution by entering
into an agreement with such bank or financial
institution for the transfer of such financial assets to
such company on such terms and conditions as may
be agreed between them. Under sub section (2) of
section 5 of the SARFAESI Act, the asset
reconstruction company shall be deemed to be the
lender and all rights of the bank shall vest in them.
Section 6 of the SARFAESI Act provides that the bank
or financial institution may, if it considers
appropriate, give a notice of acquisition of financial
assets by any asset reconstruction company, to the
WP(C) NO. 12757 OF 2017
concerned obligor and the obligor, on receipt of such
notice, shall make payment to the concerned asset
reconstruction company, and payment made to such
company in discharge of any of the obligations in
relation to the financial asset specified in the notice
shall be a full discharge to the obligor, and where no
such notice is given by any bank or financial
institution, any money or other properties
subsequently received by the bank or financial
institution, shall constitute monies or properties held
in trust for the benefit of and on behalf of the asset
reconstruction company, and such bank or financial
institution shall hold such payment or property which
shall forthwith be made over or delivered to such
asset reconstruction company. The purpose of notice
WP(C) NO. 12757 OF 2017
under Section 6(1) being as above, no prejudice is
caused by not serving the notice on the obligor, as
the Section takes care of the situation where no notice
is served on the obligor. The petitioner has, however,
been issued with Ext. P2 notice under Section 6 (1)
by the 2nd respondent bank. The SARFAESI Act does
not contemplate a notice to the borrower before the
assignment of the financial assets in favour of the
asset reconstruction company. By virtue of Section
5(2), the 1st respondent shall be deemed to be the
lender and all the rights of the bank shall vest in the
1st respondent as per deed of assignment. The rights
of the borrower are not affected by any such
assignment of debt. Therefore, the contention of the
petitioner that he is entitled to notice before
WP(C) NO. 12757 OF 2017
assignment of financial assets to the asset
reconstruction company is not sustainable.
Accordingly, the writ petition is dismissed.
However, the dismissal of the writ petition will not
stand in the way of the petitioner in seeking any
other remedy, as may be available in law, as against
any proceedings under the SARFAESI Act, 2002.
Sd/-
MURALI PURUSHOTHAMAN
JUDGE
SRJ
WP(C) NO. 12757 OF 2017
APPENDIX OF WP(C) 12757/2017
PETITIONER EXHIBITS
EXHIBIT P1 TRUE COPY OF THE POSSESSION NOTICE
18.1.2017.
EXHIBIT P2 THE TRUE COPY OF THE ASSIGNMENT NOTICE
DATED 20.3.2017.
