The Supreme Court in the case of Phoenix ARC Private Limited v/s Vishwa Bharati Vidya Mandir & Ors. ruled that the High Court ought to appreciate rights of secured creditors to recover the amount due under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
Vishwa Bharati Vidya Mandir is running educational institutions and is a Society registered under the Karnataka Societies Registration Act, 1960 which had availed credit facilities from Saraswat Cooperative Bank Limited. Similarly, St. Ann’s Education Society had also availed credit facilities from the Bank.
It appears that in order to secure the due repayment of the aforesaid credit facilities, various loans or security documents were executed by the respective respondents, including personal guarantees in favour of the bank.
Senior Advocate V. Giri, appearing on behalf of the appellant(s) contended that in the present case the borrowers are liable to pay to the appellant ARC, secured creditor. It is submitted that for recovery of the amount due and payable, initially in the year 2003, notice under Section 13(2) of the SARFAESI Act was issued and therefore the proceedings under the SARFAESI Act commenced.
Senior Advocate Basavaprabhu S. Patil, appearing on behalf of the original borrowers contended that the present appeals are against the ad interim order or interim order passed by the High Court and the main writ petitions are pending before the High Court.
The division bench of Justice M.R. Shah and Justice B.V. Nagarathna noted that it is the case on behalf of the appellant that as such the communication cannot be said to be a notice under Section 13(4) of the SARFAESI Act at all. After the notice under Section 13(2) of the SARFAESI Act was issued in the year 2013 and thereafter despite the Letter of Acceptance, no further amount was paid, the appellant called upon the borrowers to make the payment within two weeks failing which a further proceeding under Section 13(4) of the SARFAESI Act was proposed.
While dismissing the writ petition before the high court, the Apex Court held that the High Court should have been extremely careful and circumspect in exercising its discretion while granting stay in such matters.