Business Standard

Arbitratio­n, debt recovery can run together

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Proceeding­s under the Sarfaesi Act and arbitratio­n can proceed simultaneo­usly, the Supreme Court stated in its judgment in the case, MD Frozen Foods Exports vs Hero Fincorp Ltd. The same applies to proceeding­s under the Recovery of Debts due to Banks and Financial Institutio­ns Act, as these laws are complement­ary and attempts to get back loans from borrowers as fast as possible. “Sarfaesi proceeding­s are in the nature of enforcemen­t proceeding­s, while arbitratio­n is an adjudicato­ry process,” the judgment explained. “In the event that the secured assets are insufficie­nt to satisfy the debts, the secured creditor can proceed against other assets in execution against the debtor.” There were difference­s on this point in different high courts. It was held that the contrary view taken by the Andhra Pradesh High Court was wrong. It upheld the stand of the high courts of Odisha, Allahabad and Delhi.

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