SARFAESI ACT, 2002 – Invocation – Preconditions – NPA classification – Mandatory requirement Held: Invocation of proceedings under Section 13 of the SARFAESI Act is contingent upon the existence of certain foundational conditions, one of which is that the borrower’s account must be classified as a Non-Performing Asset (NPA). Without satisfaction of such condition, recourse to SARFAESI measures is not permissible. Para Reference: ¶18

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SARFAESI ACT, 2002 – Invocation – Preconditions – NPA classification – Mandatory requirement

Held: Invocation of proceedings under Section 13 of the SARFAESI Act is contingent upon the existence of certain foundational conditions, one of which is that the borrower’s account must be classified as a Non-Performing Asset (NPA). Without satisfaction of such condition, recourse to SARFAESI measures is not permissible.

Para Reference: ¶18

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SARFAESI – Nature of remedy – Procedural law – Applicability to existing debts

Held: The SARFAESI Act provides a procedural mechanism for enforcement of security interest and does not create new substantive rights. It applies to all existing and live debts at the time of its enforcement or applicability to the financial institution.

Para References: ¶21, ¶36–38

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SARFAESI & Arbitration – Simultaneous proceedings – Maintainability

Held: Proceedings under the SARFAESI Act and arbitration proceedings can be pursued simultaneously. SARFAESI provides an additional remedy and is not in derogation of other legal mechanisms.

Para References: ¶26–33

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SARFAESI – Additional remedy – Doctrine of election – Not applicable

Held: The SARFAESI Act and other recovery mechanisms such as RDDB Act or arbitration are complementary remedies. Doctrine of election does not apply as remedies are not inconsistent.

Para References: ¶27–28, ¶32

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SARFAESI – Applicability to NBFCs – Notification – Effect

Held: Once a Non-Banking Financial Company (NBFC) is notified as a financial institution under the Act, it is entitled to invoke SARFAESI provisions in respect of existing actionable debts.

Para References: ¶7, ¶37–38

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SARFAESI – Debt must be ‘live’ and enforceable

Held: For invoking SARFAESI, the debt must be subsisting and actionable; stale or extinguished claims cannot be enforced under the Act.