Mardia Chemicals Ltd. Ashok Mfg. Co. Pvt. Ltd. vs Union of India and others etc

By : Adv chennai

Mardia Chemicals Ltd. etc. etc. Petitioners with M/s. Ashok Mfg. Co. Pvt. Ltd. and others Petitioners Vs. Union of India and others etc. etc. Respondents, decided on 4/8/2004.

Name of the Judge: Hon’ble the Chief Justice and Hon’ble Mr. Justice Brijesh Kumar and Hon’ble Mr. Justice Arun Kumar.

Subject Index: Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — validity of .

In a landmark judgment passed on 8.4.2004, the Supreme Court has upheld the constitutional validity of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SRAFESI) Act, 2002 except for the condition of deposit of 75% of the outstanding amount before approaching the Debt Recovery Tribunal. (DRT). This decision is reported as Mardia Chemicals Ltd. etc. vs. Union of India & Ors 

The Supreme Court held as under-

1) that after service of notice under sub-section (2) of section 13 it is incumbent upon secured creditor to serve 60 days notice before proceeding to take any of the measures as provided under sub-section (4) of section 13 of the Act.

2) if the borrower raises any objection or places facts for consideration of the secured creditor, such reply to the notice must be considered with due application of mind and the reasons for not accepting the objections, howsoever brief they may be, must be communicated to the borrower.

3) if any measures are taken under sub-section (4) of section 13 and before the date of sale/auction of the property it would be open for the borrower to file an appeal (petition) under section 17of the Act before the Debt Recovery Tribunal.

4) the tribunal in exercise of its ancillary powers shall have jurisdiction to pass any stay/ interim order subject to condition as it may deem fit and proper to impose.

5) requirement of deposit of 75% of amount claimed before entertaining an appeal (petition) under section 17 of the Act is an oppressive, onerous and arbitrary condition against all the canons of reasonableness. Condition is invalid and struck down.

COMPARATIVE CITATIONS:

2004 (4) SCC 311, 2004 (4) JT 308, 2004 (4) Scale 338, 2004 (2) SLT 991, 2004 (120) CC 373, 2004 (3) Supreme 243; 2004 (2)

KLT 273 (SC); 2004 (2) CTC 759 (SC): 2004 AIR(SC) 2371