The Delhi High Court recently reaffirmed that no writ petition should be accepted once SARFAESI Act proceedings have started and the borrower is harmed by any bank activities for which there is a remedy under the Act.
Due to the bank's recovery action against the borrower and himself under the 2002 Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, the person who served as the lending facility's guarantor's plea was rejected by the court.
The petitioner argued that the bank's claims were settled once a resolution plan regarding the borrower was adopted in accordance with section 31 of the 2016 Insolvency and Bankruptcy Code. As a result, it was unable to seek compensation for sums greater than those authorized by the NCLT.
In the instant case titled Sanjay Sarin v. The Authorised Officer, Canara Bank & Ors., the issue raised before the Delhi High Court was:
Is the petition maintainable before the court?
With regard to this issue, the Court stated that the writ cannot be heard because the petitioner's challenge to the bank's action was already the subject of a challenge before the DRT and was undergoing adjudication.
The Court stated that the bank had the right to proceed against the collateral securities for the recovery of its debts, which were independent of the resolution plan approved by the NCLT, taking note of sec. 33(3) of the IBC, which envisages a liquidation process in the event of contravention of a resolution plan.
The court categorically held that,
“This is the scheme under the IBC, and if the Parliament, in its wisdom, has only provided the remedy of a liquidation process under Section 33(3) of IBC as a consequence of non-implementation of the resolution plan by the concerned corporate debtor, this Court cannot create another remedy just because the afore-noted remedy is not sufficient or suitable for the Petitioner."
Accordingly, the court held that the petition was not maintainable and was accordingly dismissed.