Calcutta High Court: In a petition challenging the sale of fishing vessel on bank’s failure to issue a notice under Section 13(2) of the SARFAESI Act, 2002 (SARFAESI Act) before selling the vessels rendering the entire process unauthorised, a division bench comprising of Arijit Banerjee and Apurba Sinha Ray,* J., affirmed that SARFAESI Act does not apply when security interest is created in vessels defined by the Merchant Shipping Act, 1958 and rejected the appellant’s claims against the bank’s actions. The Court held that the Cooperative Banks have discretion in choosing recovery methods. The Court also emphasised the need for factual matters to be addressed through proper evidentiary proceedings.
Factual Background:
In the instant matter, the appellant obtained a loan from respondent 3, a bank, in April 2016, for the purchase of three fishing vessels. Due to the appellant’s failure to pay the monthly instalments, the bank repossessed the vessels and attempted to sell them through public auction. After unsuccessful attempts, the bank sold the vessels to private respondents through private contracts. The appellant initially challenged the auction process in a writ petition but later withdrew the same upon realizing its ineffectiveness.
Parties’ Contentions
The appellant contended that the SARFAESI Act applies to Co-operative Banks, and the bank should have issued a notice under Section 13(2) of the SARFAESI Act before selling the vessels. The appellant asserted that fishing vessels are not excluded from the definition of ‘vessel’ under the Act, and the bank’s sale of the vessels without following SARFAESI Act procedures is illegal.
The bank and private respondents argued that Section 31(d) of the SARFAESI Act bars its application to the creation of security interest in fishing vessels under the Merchant Shipping Act, 1958. The bank had the right to sell the vessels through private contracts.
Moot Point
Whether SARFAESI Act is applicable to Cooperative Banks created under state legislations, particularly concerning the sale of fishing vessels?
Court’s Observation
The Court observed that Section 31(d) of the SARFAESI Act explicitly excludes its application to vessels as defined in the Merchant Shipping Act, 1958. The Court observed that Pandurang Ganpati Changule v. Vishwasrao Patil Murgud Sahakari Bank Ltd., (2020) 9 SCC 215 did not abrogate Section 31(d) and Co-operative Banks can choose alternative legal processes for recovery. The Court opined that Cooperative Banks have discretion to choose recovery methods; SARFAESI Act does not mandate their use.
The Court examined that the definition of ‘vessel’ in the Merchant Shipping Act includes fishing vessels, and, therefore, SARFAESI Act does not apply to the fishing boats in question. The Court also stated that appellant’s allegations regarding auction notice, loan statements, and Covid-19 impact are factual matters not suitable for the writ court’s consideration.
Court’s Decision
The Court dismissed the appeal with a cost of Rs. 20,000 to be paid by the appellant to the respondent co-operative bank within one month. The court finds no reason to interfere with the lower court’s judgment.
[Mangal Chand Maji v. State of W.B., 2023 SCC OnLine Cal 4763, order dated 01-12-2023]
*Judgment by Justice Apurba Sinha Ray
Advocates who appeared in this case :
Mr. S. P. Pahari, Mr. Tapan Kumar Mahapatra, Counsel for the Appellant
Mr. Srijan Nayak, Adv. Ms. Rituparna Maitra, Adv. Mr. Biplab Das, Adv. Mr. Partha Sarathi Pa, Counsel for the Respondent 2
Mr. Prasenjit Debnath, Adv. Mr. Ritwik Pattanayak, Counsel for the Respondent 3
Mr. Saptarshi Kumar Mal, Counsel for the Private Respondent
