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...

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...

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...

NBFCs With Assets Over ₹100 Crore Can Invoke SARFAESI Act: Allahabad High Court

On 24 March, the Allahabad High Court held that non-banking financial companies (NBFCs) with assets of Rs. 100 crore or more qualify as financial institutions under the SARFAESI Act, 2002 and can enforce security interest in secured debts. A Bench comprising Justices Ajit Kumar and Swarupama Chaturvedi referring to the Ministry of Finance notification dated 24 February 2020, observed: “With the plain reading of the notification, it is clear that through the above notification the Central...

DRT Cannot Condone Delay Beyond 45 Days In Pleas Challenging SARFAESI Recovery Measures: Karnataka High Court

Recently, the Karnataka High Court held that the Debt Recovery Tribunal (DRT) cannot condone delays beyond the 45-day limit for filing applications under Section 17 of the SARFAESI Act, which allows borrowers to challenge a bank's recovery actions before the tribunal. The court clarified that Section 5 of the Limitation Act, 1963, which permits courts to excuse in case of sufficient cause, does not apply to such proceedings. The single-judge bench of Justice Lalitha Kanneganti observed...

SARFAESI, RDB And PMLA Must Be Reconciled; Recovery Laws Cannot Prevail Over PMLA: Bombay High Court

The Bombay High Court at Nagpur recently held that the provisions of the SARFAESI Act and the Recovery of Debts and Bankruptcy Act do not override the Prevention of Money Laundering Act, observing that the statutes operate in different fields and must be interpreted so as to reconcile their provisions without defeating the object of the PMLA.A division bench of Justices M. S. Jawalkar and Nandesh S. Deshpande held, “The objective of the legislation in PMLA being distinct from the purposes of two...

Right Of Redemption Ends Once Auction Notice Is Published Under SARFAESI: Bombay High Court

The Bombay High Court on Tuesday reiterated that once an auction notice is published under the SARFAESI Act, the borrower's right of redemption stands extinguished and the Debt Recovery Tribunal cannot set aside the auction sale in a manner that effectively permits redemption. The Court observed that passing such an order in the teeth of Section 13(8) of the Act and binding Supreme Court precedents constitutes a jurisdictional error. Relying on the precedents, the court reiterated that...

Kerala High Court Sets Aside Banking Ombudsman Order For Failing To Give Reasoned Decision

The Kerala High Court recently set aside an order passed by the Banking Ombudsman rejecting a borrower's complaint over increase in interest rate on a gold loan from 14.5% to 17%, holding that the authority failed to pass a reasoned order despite a specific direction from the Court. A single bench of Justice Harisankar V. Menon was considering a writ petition filed by the borrowers, challenging the Ombudsman's order. The petitioners contended that the rate of interest was increased by the bank...