SARFAESI, Debt Recovery & Banking Laws : Recent Important Decisions

1. Telangana State Southern Power Distribution Co. Ltd vs M/S Srigdhaa Beverages(Delivered by Supreme Court on 01.06.2020) Brief Facts Respondent – auction purchaser of the property of M/s. SB Beverages Private Limited failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under SARFAESI Act Whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent. Ratio: Electricity dues,...

Delhi HC Directs Centre To File Report On Steps Taken To Ensure Proper Functioning of DRTs and DRAT During Pandemic [Read Order]

Delhi High Court has directed the Central Government to submit a status report indicating the steps that are being taken by it for ensuring the proper functioning of the DRAT and DRTs during this present pandemic situation. The Single Bench of Justice Navin Chawla has directed the Ministry of Finance and the Ministry of Information Technology & Electronics to submit status reports within one week. The order has come in a plea seeking additional online links for Debt...

Broader Implications Of The Supreme Court 's Pandurang Judgment On Co-operative Banks

In a judgment pronounced by a five judge bench in the case of Pandurang Ganpati Chaugule v. Vishwasrao Patil Murgud Sahakari Bank Limited("Pandurang"), the apex court has ruled that Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI") is, in fact, applicable to Co-operative Banks. Apart from the obvious effect of opening up SARFAESI benefits to such Co-operative Banks attempting to affect recovery, there are broader...

Moratorium On Insolvency And Bankruptcy Code, 2016: Is It A Cure-All Or Only Help A Few

On 17.05.2020, the Finance Minister of India while announcing the fifth tranche of the stimulus/relief packages to mitigate the consequences of COVID-19 on the Indian Economy, also announced that there will be no fresh insolvency filings under the Insolvency and Bankruptcy Code, 2016 ("IBC"). The Finance Minister informed that an ordinance will be brought to this effect. Undoubtedly, the business across the country requires relief but an absolute embargo upon the fresh insolvency filings...

Cooperative Banks Under SARFAESI Act : Analysis Of Constitution Bench Judgment

Recently a Constitution Bench of the Hon'ble Supreme Court comprising Hon'ble Mr. Justice Arun Mishra, Hon'ble Justice Indira Banerjee, Hon'ble Mr. Justice Vineet Saran, Hon'ble Mr. Justice M.R. Shah and Hon'ble Mr. Justice Aniruddha Bose dealt with a batch of matters in Pandurang Ganpati Chaugule v. Vishwasrao PatilMurgud Sahakari Bank Limited (Civil Appeal No. 5674 of 2009, decided on05.05.2020) decided the following issues:Whether 'co­operative banks', which are co­operative societies...

Cooperative Banks Must Comply With Banking Regulation Act And Other Laws Related To Banking: SC [Read Judgment]

The Supreme Court has held that the co­operative banks cannot carry on any activity without compliance of the provisions of the Banking Regulation Act, 1949 and any other legislation applicable to such banks relatable to 'Banking' One of the issues considered by the Constitution bench in Pandurang Ganpati Chaugule and others vs Vishwasrao Patil Murgud Sahakari Bank Limited was whether 'banking company' as defined in Section 5(c) of the BR Act, 1949 covers co­operative banks registered under the...

[Breaking] SARFEASI Act Applicable To Cooperative Banks : SC Constitution Bench

The Supreme Court has held that the Securitization and Reconstruction of Financial Assets and Enforcement of Security Act 2002 is applicable to cooperative banks."The co­operative banks under the State legislation and multi­ State co­operative banks are 'banks' under section 2(1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002", held the Constitution Bench.The Court rejected the argument that 2013 amendment to...

Scope Of Agricultural Lands As Security Interest Vis-à-Vis SARFAESI Act

Introduction Whilst the RDDBFI Act had been serving as the sole recovery Law for Banks/FI in the country for a decade, as it was not efficient mode of recovery, the Union Legislature deemed it to enact the The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) commencing from 21st June, 2002. The two main salient features of the SARFAESI Act was allowing the creation of Asset Reconstruction Companies to give a chance...

Ministry Of Finance Introduces Online Hearing Through Video Conferencing Facility In Five DRTs [Read Notification]

The Department of Financial Services under the Union Ministry of Finance on Friday with the help of the National Informatics Centre has introduced online hearings via video conferencing in five debt recovery tribunals across the country keeping in mind the objective of social distancing in order to combat the pandemic of Covid-19.Initially, DRT-3 Delhi, DRT-3 Kolkata, DRT Dehradun, DRT-1 Chennai and DRT-3 Mumbai have been identified for providing this facility. The following pre-requisite...

Contracts Of Adhesion : Does The NCLT Have Power To rule Generally On Validity Of The Clauses Of Contracts ?

The National Company Law Tribunal ('NCLT'), established under the Companies Act, 2013, has emerged as the forum of choice for the purpose of 'recovery' of debt from corporate debtors under the Insolvency and Bankruptcy Code, 2016 ('IBC'), even though it was not established with the intent to enforce and effect recovery of debts. As much as everyone, including the learned members of the NCLT, often insist to the contrary, the stark reality is that the NCLT has become indeed, a forum to...

Delhi HC Allows Interim Reoccupation To Debtor of Property Securitized By Bank, Due To Nationwide Lockdown [Read Order]

Delhi High Court has allowed a family to reoccupy a floor of the property, which was securitised by IIFL Home Finance Limited under Section 14 of SARFAESI Act, due to the extraordinary circumstances caused by nationwide lockdown. While allowing the Petitioner one floor of the property, the Division Bench of Justice Rajiv Sahai Endlaw and Justice Manoj Kumar Ohri has clarified that they will not induct any other person into occupation of the said first floor and will not encroach upon...

Applicability Of SARFAESI Act To Co-operative Societies/Banks: SC Constitution Bench Begins Hearing

A Five Judge Constitution Bench headed by Justice Arun Mishra has commenced hearing on the question of applicability of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 on Co-operative Societies/Banks.A three judge bench, referred this matter to constitution bench noticing the conflicting decisions in Greater Bombay Coop. Bank Ltd. vs. United Yarn Tex (P) Ltd. and others [(2007) 6 SCC 236] and the earlier pronouncements of this Court in...