DEBT RECOVERY LAWS
Limited SARFAESI Auction Deferment To Preserve Subject Matter Within Supervisory Jurisdiction: Kerala High Court
The Kerala High Court on Monday upheld a Single Judge's two-week deferment of a SARFAESI auction, holding that the limited relief granted to preserve the subject matter did not exceed supervisory jurisdiction under Article 227 of the Constitution. A division bench of Justice Anil K Narendran and Justice Muralee Krishna S dismissed a writ appeal filed by Union Bank of India, observing that the single judge had not entered into the merits of the dispute. S.S. Glass World had approached the...
Delhi High Court Sets Aside Bank-Issued LOCs Against Pomegranate Coaters Directors and Guarantors
The Delhi High Court on 18 February set aside Look Out Circulars (LOCs) issued by Bank of Baroda against the directors and guarantors of Pomegranate Coaters Pvt. Ltd. Justice Purushaindra Kumar Kaurav was hearing petitions by the directors, promoters, and guarantors of Pomegranate Coaters, who had availed credit facilities from the bank.Following defaults, the bank initiated recovery proceedings under the SARFAESI Act and the Recovery of Debts Due to Financial Institutions Act, and...
Kerala High Court Says Writ Maintainable Against SARFAESI Notice Before Recovery Action In Housing Loan Dispute
The Kerala High Court has held that a writ petition filed by the legal heirs of a deceased borrower was maintainable at the stage of a Section 13(2) notice under the SARFAESI Act, since no measures under Section 13(4) had yet been initiated and their challenge also concerned the bank's alleged failure to transfer the insurance premium to the insurer. A Division Bench of Justice Anil K Narendran and Justice Muralee Krishna S was hearing an appeal filed by Prameela Devi and her two daughters, the...
Borrower Cannot Redeem Mortgaged Property After Sale Certificate Under Pre-2016 SARFAESI: Madhya Pradesh HC
Holding that a borrower cannot reclaim mortgaged property after issuance of a sale certificate under the unamended SARFAESI regime, the Jabalpur Bench of the Madhya Pradesh High Court dismissed writ petitions challenging auction proceedings initiated by Bank of India. A Division Bench of Justices Vivek Rusia and Pradeep Mittal clarified that the equitable principle of “once a mortgage, always a mortgage” operates only until the right of redemption is lawfully extinguished.The case arose from...
Auction Purchasers Cannot Remove EPFO Attachment As CERSAI Registration Came After EPF Dues Accrued: Kerala High Court
The Kerala High Court has recently dismissed a writ petition filed by auction purchasers seeking removal of attachments over a property purchased in SARFAESI proceedings conducted by Federal Bank. Justice Viju Abraham held that since the bank itself could not claim statutory priority under Section 26-E of the SARFAESI Act, the auction purchasers were not entitled to seek effacement of the EPFO attachment. The court noted that priority under Section 26-E arises only upon registration of...
Finality Of SARFAESI Auction Is Matter Of Public Policy: Delhi High Court Bars Recovery Of Pre-Sale Dues
Holding that the finality of a statutory auction is a matter of public policy, the Delhi High Court has ruled that an auction purchaser under the SARFAESI Act cannot recover pre-sale statutory dues after unconditionally accepting the sale certificate. Allowing such recovery, the Court said, would render the “as is where is” clause meaningless and create uncertainty for secured creditors. Setting aside the Commercial Court's January 31, 2023 judgment, a Division Bench of Justices Anil...
No Absolute Right Of Appeal Under SARFAESI Without Pre-Deposit: Delhi High Court
The Delhi High Court has recently upheld the dismissal of a DRAT appeal for failure to comply with the mandatory pre-deposit under Section 18 of the SARFAESI Act. A Division Bench of Justices Vivek Chaudhary and Renu Bhatnagar held that the statutory right of appeal is conditional. The court observed that “the said right is not absolute.” The case arose after the Debts Recovery Tribunal dismissed a securitisation application filed by Renu Goyal challenging measures taken by Edelweiss Asset...
Civil Courts Cannot Preempt SARFAESI Action, Karnataka High Court Sets Aside Injunction Against SBI
The Karnataka High Court has recently set aside an interim injunction that had restrained the State Bank of India from enforcing a corporate guarantee against Patel Engineering Limited. A Division Bench of Chief Justice Vibhu Bakhru and Justice C.M. Poonacha held that the Commercial Court in Bengaluru could not have injuncted SBI from proceeding under the SARFAESI Act or the Recovery of Debts and Bankruptcy Act. The bench noted that Section 34 of the SARFAESI Act bars courts from...
Delhi High Court Condones Late Filing By Avantha Holdings, Applies “Parity” Against Bank's Own Delay
The Delhi High Court on 12 February condoned a 14-day delay by Avantha Holdings Limited in filing its written statement in recovery proceedings, holding that procedural fairness requires parity when the creditor bank itself delayed service of summons by nearly a month. A Division Bench of Justices Vivek Chaudhary and Renu Bhatnagar allowed a writ petition filed by Avantha Holdings against ICICI Bank Limited, observing that a tribunal cannot ignore substantial delay by one party while...
Supreme Court Dismisses Plea Against Allahabad HC Ruling Upholding DRT Registrar's Power to Issue Notice Under SARFAESI
The Supreme Court on Tuesday dismissed a special leave petition challenging an Allahabad High Court ruling that upheld the authority of the Registrar of the Debts Recovery Tribunal to issue notice in a securitisation application under the SARFAESI Act. A Bench of Justices Dipankar Datta and Satish Chandra Sharma declined to interfere with the High Court's decision, observing, “We are not inclined to interfere with the impugned judgment and order of the High Court; hence, the special leave...
RBI 2016 MSME Framework Not Absolute Bar To SARFAESI Action Against MSME Borrower: Calcutta High Court
The Calcutta High Court has recently observed that banks are required to examine and keep SARFAESI proceedings in abeyance only if an MSME borrower raises a specific objection with supporting materials and an affidavit asserting its MSME status.The court clarified that the 2016 RBI 'Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises' does not create an absolute bar on classifying an MSME loan account as NPA or initiating action under the SARFAESI Act.Justice...
Bank Can Exercise Lien On Guarantor's Salary, Section 60 CPC Not Applicable: Kerala High Court
The Kerala High Court on 9 February held that a bank is entitled to exercise its right of lien over a guarantor's salary account. It clarified that protection under Section 60(1)(i) CPC does not restrict the bank's substantive right. A Division Bench of Justice Anil K. Narendran and Justice Muralee Krishna S, while deciding cross appeals filed by Canara Bank and the guarantor, Agi Kumar, allowed the bank's appeal and set aside the single judge's direction limiting the lien. The judges...