The Chhattisgarh High Court has held that Section 35 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(SARFAESI) Act prevails over the Rules of 2015 and the Demand for the transfer fee is not allowable.
M/s Parth Concast Ltd, the petitioner is a Company engaged in the business of producing steel and iron products. The Chhattisgarh State Industrial Development Corporation Limited (‘CSIDC’) had allotted four parcels of land situated at the Industrial Development Center to one M/s Brahaspati Iron and Steel Company Private Limited ( ‘BISCPL’), which is engaged in manufacturing hot and cold rolled products of steel and ancillary purposes, on lease for a period of 99 years.
BISCPL took a loan from the State Bank of India, respondentNo.5 after obtaining a No Objection Certificate ( ‘NOC’) from CSIDC against the creation of security interest over its leasehold rights in respect of the properties in question. The BISCPL defaulted in repayment of its secured debt to respondent No.5 and declared BISCPL as a Non-Performing Asset ( ‘NPA’) as per the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(‘SARFAESI Act’) and informed CSIDC in advance about initiating a proceeding under the provision of Section 13(4) of the SARFAESI Act and for recovery of secured debt, took possession of the secured assets including the right to transfer by way of lease, assignment or sale for realizing the secured asset.
An e-auction sale notice under Section 13(4) of the SARFAESI Act was published on 09.05.2015 for the sale/transfer of the leasehold rights.The petitioner participated in the e-auction and was declared a successful auction purchaser, and a sale certificate in respect of the above-mentioned properties was issued on 16.06.2015 upon payment of 25% of the total consideration amount to respondent No.5.
An application submitted by the petitioner to Chhattisgarh State Power Distribution Company Limited (‘CSPDCL’) for a new HT connection was rejected by a letter dated 05.08.2015 as there was no lease deed in favour of the petitioner. The petitioner, under duress, paid the transfer fees for the transfer of lease in respect of plots of lands forming part of the lease deed dated 16.04.2004.
The HC observed that the provisions contained in SARFAESI Act will prevail over the Rules of 2015 and held that the demand for transfer fees made by the CSIDC is not sustainable in law.It was noticed that the petitioner had deposited a transfer fee in respect of the lease deed dated 16.04.2004, without any objection and therefore there fund of the transfer fee made by the petitioner to CSIDC is not directed.
Third-party rights had been created in favour of M/s Tirumala Balaji Smelters Private Limited and M/s Balram Biotech Private Limited, but they are not made party respondents to the proceedings. Adverse orders cannot be passed against M/s Tirumala Balaji Smelters Private Limited and M/s Balram Biotech Private Limited in their absence.
The HC bench of Shri Arup Kumar Goswami, Chief Justice and Shri Parth Prateem Sahu, Judge directed the CSIDC to execute the lease deeds in favour of the petitioner for the remaining terms of the original lease deeds based on the sale certificates issued. Further directed to the amounts paid by the petitioner in terms of the interim order dated 07.05.2018 shall be adjusted towards the payment of registration fees.
Mr S.P. Upadhyay, senior counsel assisted by Mr Ankit Pandey, counsel for the petitioner and Mr Jitendra Pali, Mr Prafull N. Bharat, Mr Ayaz Naved, Ms Sharmila Singhai and Mr P.R. Patankar appeared for the respondents.
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