ROZINA FIROZ HAJIANI Vs. UNION OF INDIA

JUDGEMENT

(1.) A disturbing trend is noticed by this writ Court as to the manner in which chronic defaulters are taking resort to the provisions of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'the IBC' for short) to frustrate secured creditors and auction purchasers from proceeding, in accordance with law, under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as 'the Securitisation Act' for short).

(2.) In a number of such matters, it is found that the borrowers/ guarantors act as fence sitters and do not take any steps when the secured creditors proceed under Sec. 13(2) of the Securitisation Act and take further consequential steps, till the culmination of the process and auction purchasers coming into the picture. At the stage when the auction sale has been conducted and the auction purchaser has come into the picture, in a few instances, even after the sale certificate is issued, when physical possession of the secured asset is about to be handed over to the auction purchaser, the original borrowers/guarantors initiate collusive proceedings under Sec. 94 or Sec. 95 of the IBC, claiming triggering of moratorium under Sec. 96 thereof, the moment such proceedings are filed before the National Company Law Tribunal (NCLT). As a consequence, all steps taken under the provisions of the Securitisation Act, suddenly come to a standstill and such borrowers/guarantors, who are defaulters, wear a cloak of immunity under the garb of moratorium triggered under Sec. 96 of the IBC. In such a situation, the secured creditor and/or the auction purchaser are required to approach the NCLT and thereafter, the proceedings reach the National Company Law Appellate Tribunal (NCLAT) and then the Supreme Court, till which time the auction purchaser is completely frustrated, despite having parted with consideration in terms of the bid amount.

(3.) The manner in which such borrowers/guarantors and chronic defaulters are using the provisions of the IBC, shows that the objects of the both the IBC as well as the Securitisation Act are frustrated. This has the tendency of adversely affecting the economy, financial health and business environment in the country. In such situations, the writ Court cannot remain a mute spectator, when misuse of legal provisions demonstrates failure of justice. The present petition, although it arises from an interim order of the Debts Recovery Tribunal-I, Mumbai (DRT), is one such example of gross facts manifesting the attitude and approach adopted by the respondent Nos.3 to 7 i.e. the borrowers and guarantors to ensure that the legal process is frustrated.