K.KANNAN,J. - (1.) THE writ petitioners, who are the guarantors of the loan, have challenged the notices dated 10.02.2005 (Annexure P-1 & P-2) contending that the action of the respondent-Bank under SARFAESI Act is not maintainable for the reason that the principal borrower has applied under the Sick Industries Companies (Special Provisions) Act, 1985 (for short, 'the SICA 1985') and during the pendency of the proceedings by virtue of Section 22 of the SICA 1985, no proceedings for recovery are possible. It is contended that the right of enforcement of security itself cannot be done without exhausting the remedy against the principal debtor. It is further contended that the subsequently impleaded party namely the International Asset Construction Company Private Limited (IARC) is not competent to prosecute the relief of enforcement on the ground that the creditor Bank has not impleaded the IARC Company and IARC itself cannot seek enforcement independently.
(2.) THE learned counsel appearing for the petitioners relied on a judgment in "M/s Patheja Bros Forgings & Stamping and another v. ICICI Ltd. and others, 2000(3) R.C.R.(Civil) 609 : JT 2000(8) SC 252" to contend that enforcement for debt against a 'sick company' cannot be made even against a guarantor if proceedings is pending under the SICA 1985. The reference to the decision rendered in 2002 may not be relevant, as pointed out by the counsel for the respondents, in view of the change of law that SICA 1985 has undergone by inclusion of two proviso through amendment in Act 54 of 2002 to Section 15 that deals with reference to the Board. The proviso insofar as is relevant for our case is reproduced hereunder: "Provided also that on or after the commencement of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where as reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less than three fourth in value of the amount outstanding against financial assistance disbursed to the borrower of such seured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act." After this amendment, the provisions of SICA 1985 get excluded insofar as a financial institution is concerned to enforce security under SARFAESI Act. The reference to M/s Patheja Bros Forgings & Stamping's case, therefore, cannot no longer avail to the petitioners. The objection that the debt cannot be directly enforced against a guarantor, is also not legally sound since the liability of the guarantor is coextensive with the principal debtor and there is no bar under the SARFAESI Act to claim a right of enforcement against only the guaruantor.
(3.) THE objection that the IARC cannot prosecute the reconstruction, is also not tenable in view of the provisions under Section 5 of the SARFAESI Act which enables the financial institution which hold the security to transfer the assets to a reconstruction company.;