Taming An Unruly Horse By Wielding The ‘Uncelebrated’ Section 17 of The Securitization Act

[2021] 130 taxmann.com 303 (Article)

Distinguishably since its enactment and inception, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act/Securitization Act”) has evinced to be one of the most significant pieces of legislation, aimed towards the facilitation of “easy and faster recovery of loans advanced by banks and financial institutions.” The Securitization Act was legislated, succeeding the enactment of the Recovery of Debts and Bankruptcy Act (“RDB Act”) in the year 1993, under an acknowledgment that the RDB Act had failed to achieve its intended aims and objectives. In this regard, the Hon’ble Apex Court2, while accentuating the motives behind the enactment of the Securitization Act, observed, “2002 Act was brought into force as a result of two committee reports which opined that recovery of debts due to banks and financial institutions was not moving as speedily as expected, and that, therefore, certain other measures would have to be put in place in order that these banks and financial institutions would better be able to recover debts owing to them.” Simultaneously, the Hon’ble Court in M.D. Frozen Foods Exports (P) Ltd. v. Hero Fincorp Ltd.3, appreciating the scope of the said enactment, remarked, “[t]he scheme of the SARFAESI Act sets out an expeditious, procedural methodology, enabling the bank to take possession of the property for non-payment of dues, without intervention of the court.” Indisputably, the Securitization Act envisions a comprehensive mechanism for the enforcement of security interest4 by secured creditor(s)5, with limited or no judicial intervention. However, considering the vast and seemingly unbridled expanse of this faculty of secured creditors, a proclivity of its misemployment and abuse cannot be ruled out. Consequently, in order to curtail any such unrestricted and untrammeled deployment of secured creditors’ said potentiality, inherent safeguards, inter alia, in form of the provisions that under section 17are envisioned under the SARFAESI Act. Evidently, a justification for the incorporation of such an armour alongside an independent recovery mechanism by secured creditor(s) under the SARFAESI Act seems to be predicated on a need to establish an equilibrium between inconsistent yearnings, besides guaranteeing that none of the parties to such conflicting interests feel excepted in their potentiality to seeks redressal of their concerns.

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