SARFAESI Enforcement Cannot Be Invoked After Debt Is Extinguished Under IBC: Orissa High Court

The Orissa High Court has held that Section 31 of the SARFAESI Act cannot operate as an independent source of enforcement power once a resolution plan under the Insolvency and Bankruptcy Code extinguishes the underlying debt.Section 31 excludes certain secured assets and transactions from the Act's enforcement mechanism, meaning SARFAESI recovery powers do not apply to them.A Single Judge Bench of Justice Sanjeeb K. Panigrahi allowed a writ petition by Sree Metaliks Limited, Keonjhar against the...

Allahabad HC Flooded With Pleas Seeking Expeditious Disposal Of Section 14 SARFAESI Matters, Directs UP Govt To Issue Instructions

Observing a “flood” of petitions over delays in processing applications for assistance in taking possession of secured assets and non-compliance with earlier directions, the Allahabad High Court has cautioned that such inaction defeats the purpose of the SARFAESI Act. “Recently we have seen a flood of writ petitions before this Court in which the secured creditor or auction purchaser comes for the expeditious disposal of the application under Section 14 of the SARFAESI Act, 2002 and further in...

Borrower Cannot Use Court Receiver Appointment In Arbitration Proceedings To Resist SARFAESI Action: Bombay HC

The Bombay High Court has held that a borrower cannot rely on the appointment of a Court Receiver, which was ordered to retain possession of a mortgaged property pending arbitration, to resist enforcement of a security interest under the SARFAESI Act, particularly when such enforcement has not been challenged. Justice Arif S. Doctor, in a dispute between Aditya Birla Finance Ltd and Ma Durga Hardware Stores, said that it would be inequitable for the respondent to use the Court Receiver's...

DRAT Chennai Orders Return of Original Title Documents Of Secured Asset Sold Under SARFAESI To Lender

The Chennai Bench of the Debts Recovery Appellate Tribunal recently directed the Debts Recovery Tribunal in Madurai to return original title documents to State Bank of India in recovery proceedings against Rukmini Mills and others, after finding that there was no reason to retain them once a 1.80-acre property was sold for 66 crore under the SARFAESI Act in 2017 and the sale had attained finality. A Bench of Chairperson Justice G. Chandrasekharan observed, “When the property is sold under...

Withdrawal Slip Can Qualify As 'Cheque' If It Operates As Payment Mandate: Kerala High Court

The Kerala High Court recently held that a withdrawal slip drawn on a co-operative society qualifies as a “cheque” under the Negotiable Instruments Act, 1881, if it functions as a mandate for payment. Justice C.S. Dias, sitting in a Single-Judge Bench, considered a petition filed by Clara Dominic, the accused in a summary trial before the Judicial First Class Magistrate Court, Pala, seeking to quash proceedings under Section 138 of the Act. The Court observed: “The substance of the...

Cheque Not Legally Enforceable For Full Amount If Part Payment Not Endorsed: Kerala High Court

The Kerala High Court has held that a cheque presented for its full value despite prior part payments without endorsement does not represent a legally enforceable debt, while upholding an acquittal in a cheque dishonour case. Justice A. Badharudeen, while dismissing an appeal filed by complainant Danikutti Philip, held, "However, when part payment(s) is/are made and the indorsement mandated under Section 56 of the NI Act failed to be recorded, presenting the cheque for the whole sum, of which a...

Non-Signatory To Cheque From Joint Account Cannot Be Prosecuted Under NI Act: Madras High Court

The Madras High Court on 3 March held that a joint account holder cannot be prosecuted under Section 138 of the Negotiable Instruments Act unless they have signed the cheque in question. Justice G. K. Ilanthiraiyan quashed cheque dishonour proceedings against G. Revathi, a co-accused, pending before the Judicial Magistrate, Puducherry, while directing that the trial continue against the other accused. He held: “In the case on hand, admittedly the second respondent herein alone signed the...

Proper Valuation Needed Before Fixing SARFAESI Auction Reserve Price: DRAT Kolkata

The Debts Recovery Appellate Tribunal (DRAT) at Kolkata has held that an e-auction cannot be invalidated solely because the reserve price is below the distress value, emphasising that proper valuation and due process are the governing requirements. A coram of Chairperson Justice Anil Kumar Srivastava observed, “In case, proper valuation has not been made and the reserve price is fixed taking into consideration the inaccurate valuation report, the intending buyer may not come forward treating...

Auction Purchaser Rights Not Absolute Under SARFAESI; Must Yield Where Sale Is Illegal: Supreme Court

The Supreme Court on Wednesday (April 1) held that the rights of a bona fide auction purchaser are not absolute and must yield where the sale process is legally flawed, as it dismissed appeals filed by auction purchasers and the Central Bank of India and upheld a Madras High Court judgment setting aside a SARFAESI auction sale.A bench of Justices Dipankar Datta and Satish Chandra Sharma affirmed the High Court's April 12, 2023 ruling, which had annulled the auction after finding that the...

Centre Appoints Justice Sudhir Kumar Jain as DRAT Delhi Chairperson

The Central Government has approved the appointment of Justice Sudhir Kumar Jain, a Member of the National Consumer Disputes Redressal Commission and former Delhi High Court judge, as Chairperson of the Debts Recovery Appellate Tribunal (DRAT), Delhi. The competent authority has cleared his appointment for a tenure of five years from the date of assumption of charge, or until he attains the age of 70 years, or until further orders, whichever is earlier. According to a communication issued by...

Delhi High Court Quashes Fraud Tag On Reliance Commercial Finance Ex-CEO As SCN Was Not Served

The Delhi High Court on Monday set aside an order declaring a former key official of Reliance Commercial Finance Limited as “fraud” in connection with loans worth over Rs 16,455 crore after noting that the show cause notice issued to him had not been served. A division bench of Justice Prathiba M Singh and Justice Madhu Jain passed the order. The petition was filed by Devang Pravin Mody challenging the Reserve Bank of India's Master Directions on Fraud Risk Management dated July 15, 2024,...

Andhra Pradesh High Court Dismisses Plea To Stall SARFAESI Proceedings, Bars Piecemeal Litigation

The Andhra Pradesh High Court has dismissed a writ petition seeking to stall recovery proceedings under the SARFAESI Act, holding that a litigant cannot raise pleas in a piecemeal manner and terming the petition a “misadventure.” A Division Bench of Justice Lisa Gill and Justice Ninala Jayasurya noted that the petitioner had executed a gift deed in 2006 in favour of his son. The deed, initially without acceptance, was later accepted before the son availed a loan from South Indian Bank, for...