SARFAESI, Debt Recovery & Banking Laws : Recent Important Decisions

1. Telangana State Southern Power Distribution Co. Ltd vs M/S Srigdhaa Beverages(Delivered by Supreme Court on 01.06.2020) Brief Facts Respondent – auction purchaser of the property of M/s. SB Beverages Private Limited failed to pay its dues, resulting in the auction by Syndicate Bank (Secured Creditor) under SARFAESI Act Whether the liability towards previous electricity dues of the last owner could be mulled on to the respondent. Ratio: Electricity dues, where they are statutory in character under the Electricity Act and as per the terms & conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically u/s 56 of the Electricity Act, 2003 (in pari materia with Section 24 of the Electricity Act, 1910), and cannot partake the character of dues of purely contractual nature. Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on "AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS", there can be no doubt that the liability to pay electricity dues exists on the respondent Click here to read the judgment2. Pandurang Ganpati Chaugale vs. Vishwasrao Patil Murgud Sahakari Bank Ltd (Delivered by Supreme Court on 05.05.2020) Brief facts: The court framed the following questions Whether cooperative banks both at the State level and multiState level are 'banks' for applicability of the SARFAESI Act? Whether provisions of Section 2(c) (iva) of the SARFAESI Act on account of inclusion of multi-state cooperative banks and notification dated 28.1.2003 notifying cooperative banks in the State are ultra vires Ratio The cooperative banks under the State legislation and multi-state cooperative banks are 'banks' under section 2(1)(c) of SARFAESI. The recovery is an essential part of banking; as such, the recovery procedure prescribed under section 13 of the SARFAESI Act, is applicable. The Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery under section 13 of the SARFAESI with respect to co operative banks. The provisions of Section 2(1)(c)(iva), of SARFAESI, adding 'a multi-state cooperative bank' is not ultra vires.Coopearative banks have to act under Banking Regulation Act with respect to banking business.Click here to read the judgment 3. K. Virupaksha vs. The State Of Karnataka (delivered by Supreme Court on 03.03.2020) Brief facts Complainant filed complaint in Court of the Principal Civil Judge (Junior Division) and JMFC alleging that Officers of bank in connivance with auction purchaser had caused wrongful loss to Complainant.FIR was registered against Appellants for alleged offences punishable under Sections 511, 109, 34, 120-B, 406, 409, 420, 405, 417 and 426 of Code Ratio The sanction of loan, creation of mortgage and the manner in which the sanctioned loan was to be released were all contractual matters between the parties. The Petitioner after dismissal of the application before the DRT filed the impugned complaint which appears to be an intimidatory tactic and an afterthought which was an abuse of the process of law. Entertaining the complaint and allowing the investigation to continue, would amount to permitting the jurisdictional police to redo the process which would be in the nature of reviewing the order passed by the Single Judge and the Division Bench in the writ proceedings by the High Court and the orders passed by the competent Court under the SARFAESI Act which was neither desirable nor permissible and the banking system could not be allowed to be held to ransom by such intimidation. Click here to read the judgment4. Union Bank of India Vs Rajat Infrastructure Pvt. Ltd. (delivered by Supreme Court on 02.03.2020) Brief Facts SLP filed against the order of High Court holding that no pre-deposit is required for entertaining an appeal before DRAT as mandated by S. 18 of SARFAESI.Respondent – guarantor and mortgager – objected to the sale of the secured asset on the ground that it is for a low amount and there is collusion between the officers of the Bank and the auction purchaser. Order of DRAT challenged before HC and HC held that no pre-deposit is required for the reason under the impugned order, no decree has been passed or liability fixed. Ratio The Court, while relying on the case of Narayan Chandra Ghosh vs. UCO Bank & Ors., held that DRAT Cannot Entertain An Appeal U/s 18 SARFAESI Act Without Insisting On Pre- Deposit. ...

SARFAESI, Debt Recovery & Banking Laws : Recent Important Decisions

Pragati Aggarwal

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