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What is the difference between RDDB & FI ACT and SARFAESI Act?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 asked

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hi Money maketh the world go round, and now it is making the legal fraternity ponder, too. Many a times, the interpretation of statutes becomes a tedious job, mostly due to the clash of legislations- their ambit and scope. On the surface what may seem as supplementary legislations, may in realty be two diverse tools of laws addressing different issues altogether. There are many situations, which neither the courts nor the legislators imagined would crop up. One of such issue is the conflict created by defaulters. And the statutes in question are the Recovery of Debts Due to Banks Financial Institution Act, 1993 and the Securitisation and Reconstruction of Finance Assets and Enforcement of Securities Interest Act, 2002. The choice of remedy which one creditor has against the debtor creates a problem of choice for the creditors. Is there actually a choice for the creditor? Choice of remedy is governed by the theory of election of remedies, which gives the creditor the liberty of choosing one out of several means afforded by law for the redressal of an injury, or one out of several available forms of action. An "election of remedies" arises when one having two co-existent but inconsistent remedies chooses to exercise one, in which event he loses the right to thereafter exercise the other. There is, however a considerable difference in the scope and legislative utility between RDDB&FI and SARFAESI. A thorough understanding of SARFAESI shows that it is an act to regulate securitisation and reconstruction of financial assets and enforcement of security interest; whereas RDDB&FI is there to establish Tribunals for expeditious adjudication and recovery of debts due to banks and financial institutions. Moreover, only secured creditors can refer to SARFAESI, whereas RDDB&FI is for all types of creditors whether or not they are secured or unsecured. Both these statutes throw an insight on the recovery of money due from defaulters to the banks and financial institutions. The Debt Recovery Tribunal, Ranchi dealt with this issue in Sushil Kumar Agarwal v Allahabad Bank[2] wherein it held that " the question that arises is whether during pendency of the suit, the defendant Bank can resort to Section 13(4) of the SARFAESI Act, 2002. So when alternative method has been prescribed to recover the amount, which the petitioner is liable to pay, and the bank in order to enforce payment has taken recourse to the Act, which has the overriding effect over other laws, no fault can be found with defendant bank in proceeding under the Act". The same issue came to light yet again, before the Debt Recovery Appellate Tribunal, Chennai in ARCIL v Kumar Metallurgical Corporation Limited[3] wherein the Appellate Tribunal held that there is no question of applicability of doctrine of election as the RDDB&FI Act covers secured as well as unsecured dues, while the SARFAESI Act takes into account only secured assets and secures interest of secured creditors only. It is not doubtful that the intention behind enacting both the Acts is complimentary to each other, but they operate in different spheres. The RDDB&FI Act is for expeditious adjudication at the hands of Tribunals, while the SARFAESI Act bypasses intervention of the courts for expeditious recovery of dues of banks and financial institutions, which is public money of which they are custodian. The Appellate Tribunal further held that Section 37 To conclude, thus, the ambit and scope of the two remedies provided by the RDDB&FI Act and SARFAESI Act, is distinct, and has different shades. **RDDB&FI** Act is an adjudicating act and **SARFAESI** Act is executory in nature. There is no adjudication process at least, till action under Section 13(4) is taken. It is another thing that, thereafter, the legality of the action taken by secured creditor under Section 13(4) can be challenged by filing appeal under Section 17 of the Act.

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Open uri20170510 32134 1c996lj?1494421732 answered

Hello Sonu, The major difference between RDDB & FI ACT and SARFAESI Act is given here. The RDDB & FI Act allows filing of proceedings for recovery of the entire defaulted amount including enforcement of the secured assets and recovery from the personal properties of the debtors whereas the SARFAESI Act confers power of enforcement only in respect of the secured asset/s. This is the important difference between RDDB & FI ACT and SARFAESI Act.

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