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...

DRT Can Hear Only Banks' Recovery Applications Against Borrowers Under RDB Act: Bombay High Court

The Bombay High Court has clarified that under the Recovery of Debts and Bankruptcy Act, the Debts Recovery Tribunal (DRT) has jurisdiction only over recovery applications filed by banks and financial institutions and cannot entertain suits or proceedings initiated by borrowers or third parties against banks.Justice N. J. Jamadar said that while the Recovery of Debts and Bankruptcy Act bars civil court jurisdiction in respect of matters the DRT is empowered to decide, that bar does not extend to...

Non-Borrower Aggrieved By SARFAESI Action Can Approach DRT, Writ Not Maintainable: Rajasthan High Court

The Rajasthan High Court has recently held that a flat purchaser whose property is treated as a secured asset under the SARFAESI Act cannot bypass the remedy before the Debt Recovery Tribunal by directly invoking writ jurisdiction. The court said a writ petition is not maintainable when an effective statutory remedy is available. Justice Sunil Beniwal dismissed the petition, holding that even though the petitioner was not a borrower or a guarantor, the possession notice directly affected his...

Mandatory Pre-Deposit For SARFAESI Appeal Applies To Mortgagor Who Secured Another's Loan: Bombay High Court

The Bombay High Court has clarified that, in the facts before it, a person who mortgages property to secure another party's loan is treated as a “borrower” under the SARFAESI Act and must comply with the mandatory pre-deposit before an appeal can be heard by the Debts Recovery Appellate Tribunal. A Division Bench of Justices R.I. Chagla and Farhan P. Dubash said the statute leaves no scope to exclude such mortgagors from the deposit requirement. “We are of the view that there is no need and...

SARFAESI Act Does Not Mandate Resorting To Section 14 In Every Case Of Taking Possession: Madhya Pradesh High Court

The Madhya Pradesh High Court has held that a secured creditor is not mandatorily required to invoke proceedings under Section 14 of the SARFAESI Act for taking physical possession of secured assets, and that possession can be lawfully taken directly under Section 13(4) read with Rule 8 of the Security Interest (Enforcement) Rules, 2002, where no resistance is offered by the borrower.A Division Bench comprising Justice Anand Pathak and Justice Pushpendra Yadav allowed a writ petition filed by...