In the case of Rambo Fashion Limited v. Board of Directors, State Bank of India & Ors., where the State Bank of India advanced a credit having limit of Rs. 8.95 crores to the Petitioner. The default took place and 9 months later, the notice contemplated by Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. Thereafter, the reply to the notice was given by the Petitioner and rejected by the Law Firm acting on behalf of the SBI rejected the reply to the notice.
The court observed that,
“In the commercial capital of the country, we find the State Bank of India, its officers and the Law firm it engaged are ignorant of even the basic principle of law. Unfortunately, during the pendency of the proceedings before the learned Debt Recovery Tribunal, the secured assets have been sold in auction.”
Thus, it appears from the facts of the case, that the assets which would have formed the basis of the securitisation proceedings have been wilfully sold by the party to the dispute. This would amount to a frustration of the mandate of the Debt Recovery Tribunal to adjudicate the dispute. Moreover, it flies in the face of the obligations of the secured creditor which provides that “the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt”
Thus, the DRT has to proceed on the basis of the reply and adjudicate the dispute under Section 13 of the Act which it has not been given an opportunity to do, and the respondent failed to give proper assistance to the court, hence in this present case, the respondent was issued directions.
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