The High Court of Delhi, while dealing with a case titled Magnum Steels Ltd v. Asset Reconstruction Company (India) Ltd held that the proceedings under SARFAESI Act and RDDB Act are complementary to each other and the proceedings for both can continue parallelly.
The court further opined that since the two proceedings are complimentary, the principle of election of remedies will not be applicable, and the secured creditor can enjoy both the remedies together.
The issue in the instant case arose when the Petitioner took a loan of Rs. 2,97,00,000/- from the Respondent-Bajaj Finance Limited, against a mortgage of secured asset. Later, the account of the petitioner was declared as Non Performing Asset (‘NPA’).
Thereafter, 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’) seeking repayment of the alleged debt with interest, Section 19 of Recovery of Debts and Bankruptcy Act, 1993 (‘RDDB Act’) for the recovery of the amount and Section 14 of SARFAESI Act seeking appointment of receiver to take possession of the secured asset.
The Debt Recovery Tribunal (DRT) allowed the application of the respondent filed under Section 19 of RDDB Act and directed petitioner to pay the loan amount. Aggrieved thereby, the petitioner filed the writ petition challenging the order as well as the maintainability of the proceedings under both the Act together.
The High Court while deciding the issue, placed reliance on Supreme Court judgements including Transcore v. Union of India and Another (2008) 1 SCC 125, Mathew Varghese v. M. Amritha Kumar and Ors. (2014) 5 SCC 610, M.D. Frozen Foods Exports Pvt. Ltd. v. Hero Fincorp Ltd. (2017) 16 SCC 741.
The Court stated that in Transcore (supra), the Supreme Court has held that the application of provisions of RDDB Act and SARFAESI Act are complementary to each other.
In Mathew Varghese (supra) as well this issue was discussed and the Supreme Court held that a closer reading of the acts indicate that SARFAESI Act or the Rules framed thereunder will be in addition to the provisions of the RDDB Act.
Subsequently, in M.D. Frozen Foods Exports Pvt. Ltd. (supra) the Supreme Court, yet again reiterated that the RDDB Act and SARFAESI Act are thus, complementary to each other and hence no question of election of remedy can arise.
After holding that the SARFAESI Act and RDDB Act are complementary to each other, court further emphasized that there is no question of election of remedy hence the remedy under both the acts can be availed by the petitioners. Accordingly the court dismissed the petition.