Civil Courts Cannot Grant Injunctions Against SARFAESI Action: Karnataka High Court

The Karnataka High Court has set aside a Commercial Court order that had stopped lenders from taking action under the SARFAESI Act, holding that such directions cannot be issued by civil courts. Referring to Section 34 of the SARFAESI Act, which bars courts from granting injunctions in such matters, the Court said: “A plain reading of the said section indicates that it proscribes any Civil Court from issuing any injunction not only with respect to the action taken, but also to an action that...

Karnataka High Court Holds KPIDFE Act, Like MPID, Has Priority Over SARFAESI Claims

The Karnataka High Court has held that secured creditors cannot claim priority under the SARFAESI Act over properties attached under the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (KPIDFE Act), and such attachment would prevail in determining the priority of claims. A coram of Justice Lalitha Kanneganti dismissed a writ petition filed by Canara Bank challenging the refusal of the Sub-Registrar to register a sale certificate issued in favour of an...

Part Payments Cannot Halt SARFAESI Proceedings Once Initiated Even If Dues Fall Below 20%: Bombay HC

The Bombay High Court has recently clarified that the 20% benchmark under the SARFAESI framework operates at the threshold stage, and once that requirement is satisfied and action is initiated, subsequent payments by the borrower do not affect the creditor's right to continue enforcement. “A proper reading of Section 31(j) of Securitisation Act makes it clear that the moment the amount due exceeds 20% of the principal amount and interest thereon, the secured creditor like the respondent No.1...

DRAT Can Recall Appeal Dismissed For Pre-Deposit Non-Compliance: Patna High Court

The Patna High Court has recently held that the Debts Recovery Appellate Tribunal (DRAT), in exercise of its review powers under Section 22(2) of the Recovery of Debts and Bankruptcy Act, 1993, can recall an appeal dismissed for non-compliance with the pre-deposit requirement. "Once such dismissal falls within the category contemplated under Section 22(2)(g), the Tribunal cannot be said to be denuded of its jurisdiction to recall or set aside the same. The reasoning adopted by the learned...

Cheque Return Memo Need Not Bear Bank Seal Or Signature To Prove Dishonour: Karnataka High Court

The Karnataka High Court has recently held that a cheque return memo need not carry a bank's seal or signature to establish dishonour under Section 138 of the Negotiable Instruments Act, 1881, particularly where the process is handled through electronic clearing systems. “In view of the electronic clearance, the seal and signature is not mandatory and therefore, seal and signature, official mark etc., on Ex.P.2 cannot be a ground to reject the complaint,” a bench of Justice V Srishananda said. ...

Bombay HC Pulls Up NCLT Mumbai Registry Over Scrutiny Lapse In Personal Guarantor Insolvency Plea

The Bombay High Court on Tuesday pulled up the Mumbai Registry of the National Company Law Tribunal (NCLT) for failing to follow mandatory procedures while scrutinising a personal guarantor insolvency petition under the Insolvency and Bankruptcy Code. A division bench of Justices Manish Pitale and Shreeram V. Shirsat held that the Registry did not comply with Rule 28 of the NCLT Rules and prior directions issued by the High Court in Bank of Baroda vs. Union of India. “It is obvious that the...

Hypothecation Agreements Attract Stamp Duty As General Agreements, Not Pledge Or Mortgage: Kerala High Court

The Kerala High Court has held that a hypothecation agreement executed to secure a loan attracts stamp duty as a general agreement under Article 5(g) of the Kerala Stamp Act and not as a pledge or mortgage, which attracts higher duty. Clarifying the position, the court said Article 6 of the Act applies only to pledges. “Article 6 of the Act will get attracted only if the instrument in question is a 'pledge'. On a conspectus reading of the agreement of hypothecation, it is evident that the...

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...

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...