Financial Creditor (Appellant) has filed the application against the Corporate Debtor (Respondent) under section 7 of the Code in March to April 2018. Before the filing of the application, the Appellant has served the notice under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002 dated 3rd January 2017 on the Respondent. During the pendency of the application before the Adjudicating Authority, the Respondent has sent a proposal for One Time Settlement. However, the Respondent was not agreed with the proposal, and on the basis that the settlement is going on some hearing, dates have been adjourned.

On 19th July 2019, the Adjudicating Authority found that the Respondent has already initiated parallel proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002 while filing the present proceedings under the Code. It is also found that the procedure of the auction is going on and the Respondent can realize the debt from the proceedings of such auction. In such conditions Adjudicating Authority held that the Respondent has filed parallel proceedings before the Adjudicating Authority, and also proceeded under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002 which amounts to forum shopping. Thus, directed the authorized signatory of the Bank i.e. Chief Manager of the Respondent to remained present on 9th August 2019 to show why he has not been penalized under Section 65 of the Code. Being aggrieved with this order, the Appellant has filed this appeal.

Issues

The issues in the present case were the following as under :

1. Whether Financial Creditor can initiate parallel proceedings under SARFAESI Act, 2002 as well as under Code; and
2. Whether filing of parallel proceedings attracts proceedings under Section 65 of the code.

Judgment

National Company Law Appellate Tribunal (NCLAT) held that the Respondent can proceed simultaneously under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002 as well as under Code. Section 238 of the Code provides that the provisions of this code shall have an effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by the virtue of any such law. Thus, the non-obstante clause of the Code will prevail over any other law for the time being in force. Ltd. Adjudicating has incorrectly held that after initiating proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002 the Appellant i.e. Financial Creditor should be precluded from filing an application under Section 7 of Code.

In the application under section 7 of Code Financial Creditor has mentioned that the Corporate Debtor has sent the notice under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002, thus, the Financial Creditor has not suppressed any material fact. The Respondent has initiated parallel proceedings against the Corporate Debtor in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI Act) 2002 as well as Code, only on this ground it cannot be inferred that proceedings against the Corporate Debtor are fraudulent or malicious. The Order of National Company Law Tribunal (NCLT) is hereby set aside.