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CS Professional · Insolvency and Bankruptcy - Law and Practice · Debt Recovery and Securitization

Mehta Steels Ltd received a reply from Union Finance rejecting its objection to a section 13(2) demand notice, with reasons stated and a hint that possession may be taken next. Mehta immediately files a section 17 application against this communication of reasons. What is the likely position?

The application is not maintainable. The Explanation to section 17(1) says that communicating reasons for rejecting the borrower's objection, or the likely action of the creditor, does not entitle anyone to approach the DRT. A section 17 application lies only against an actual section 13(4) measure.

  1. AThe application is maintainable because the rejection of the objection is itself a measure under section 13(4)
  2. BThe application is maintainable only if filed with the Appellate Tribunal
  3. CThe application is not maintainable, as communication of reasons or likely action does not entitle a person to apply to the DRTCorrect
  4. DThe application is maintainable only if the borrower pays the entire dues first

Explanation

The Explanation to section 17(1) states that communication of reasons for not accepting the borrower's representation, or the likely action at that stage, does not entitle the person to apply to the DRT. The right arises only against a section 13(4) measure actually taken. Option one wrongly treats the reply as such a measure.

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