Delhi High Court: SARFAESI Act And RDDB Act Proceedings Can Run Concurrently

Delhi High Court: SARFAESI Act And RDDB Act Proceedings Can Run Concurrently

The Delhi High Court has ruled that proceedings under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Recovery of Debts and Bankruptcy Act, 1993 (RDDB Act) are complementary to each other, and both proceedings can continue concurrently.

The bench of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora held that since both proceedings are complementary, the principle of election of remedies does not apply, and the secured creditor can avail both remedies simultaneously.

The petitioner obtained a loan of Rs. 2,970,00,000 from the respondent, secured against a mortgage of assets. Subsequently, the petitioner's account was declared non-performing.

Subsequently, on 20.12.2021, the respondent issued a notice under Section 13(2) of the SARFAESI Act. Additionally, the respondent filed an application under Section 19 of the RDDB Act before the DRT for the recovery of the amount. Furthermore, it filed another application under Section 14 of the SARFAESI Act, seeking the appointment of a receiver to take possession of the secured asset.

The DRT granted the respondent's application under Section 19 of the RDDB Act, directing the petitioner to pay the loan amount. Dissatisfied with this decision, the petitioner filed a writ petition contesting the order and questioning the concurrent proceedings under both Acts.

The petitioner argued that concurrent proceedings under both acts are impermissible. Once a notice under Section 13 of the SARFAESI Act is issued, the petitioner cannot resort to the RDDB Act. Additionally, the petitioner cannot be compelled to pursue the statutory appeal under Section 20 due to the mandatory requirement of depositing the awarded amount.

The respondent contended that the petition is not maintainable because the statutory appeal under Section 20 of the RDDB Act is available to the petitioner.

The Court noted that the respondent initially issued a notice under Section 13(2) of the SARFAESI Act and subsequently filed an application under Section 19 of the RDDB Act to recover the loan amount.

The Court held that proceedings under the SARFAESI Act and the RDDB Act are complementary to each other, and both proceedings can continue concurrently.

The Court determined that as both proceedings are complementary, the principle of election of remedies does not apply, allowing the secured creditor to utilize both remedies simultaneously. It clarified that SARFAESI Act proceedings focus on enforcement, while Section 19 of the RDDB Act involves adjudication.

The Court observed that the present petition lacked merit and was filed only to overreach the recovery proceeding. Accordingly, it dismissed the petition.