Legal Reference Library

In H.P. State Cooperative Bank Ltd. Vs. State of H.P., the Himachal Pradesh High Court held that dues to the State shall have priority. Referring to various judgments, the court said - “126. While enacting the DRT Act and the Securitisation Act, Parliament was aware of the law laid down by this Court wherein priority of the State dues was recognised. If Parliament intended to create first charge in favour of banks, financial institutions or other secured creditors on the property of the borrower, then it would have incorporated a provision like Section 529-A of the Companies Act or Section 11(2) of the EPF Act and ensured that notwithstanding series of judicial pronouncements, dues of banks, financial institutions and other secured creditors should have priority over the State’s statutory first charge in the matter of recovery of the dues of sales tax, etc. However, the fact of the matter is that no such provision has been incorporated in either of these enactments despite conf...

The Supreme Court, in Canara Bank vs. M. Amarender Reddy, has held that it is permissible to simultaneously issue notice to the borrower about the intention to sell the secured assets and also to issue a public notice for sale of such secured asset by inviting tenders from the public or by holding public auction. The high court, in the instant case, had observed that after a notice regarding intention to sell the secured asset under sub-rule 6 of Rule 8 is given by the authorised officer to the borrower, only on expiry of 30 days therefrom can the secured creditor take a decision about the mode of sale referred to in sub-rule 5 of Rule 8 the Security Interest (Enforcement) Rules, 2002, after giving notice to the borrower and then issue a public notice after expiry of further 30 days. By this interpretation, the high court has virtually re-written the provisions and inevitably extended the time frame of 30 days specified in sub-rule 6 of Rule 8, said the three-judge bench headed by ...

In Ashoke Kumar vs PNB, the Hon'ble Allahabad HC while quashing the proceedings initiated post notice under Section 13(4) of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 as the said notice was issued without duly informing the debtor about the auction of property and subsequent sale. Justice Mahesh Chandra Tripathi was hearing a petition filed by one Ashok Kumar who sought quashing of an order by the Debt Recovery Appellate Tribunal(DRAT) dated March 6, 2013 wherein an appeal against the order of the Debt Recovery Tribunal(DRT) was dismissed. According to the order, the petitioner was serving in Punjab National Bank,Varanasi. During his service period, he took a housing loan of Rs.10 lacs in 2007 for construction of a house and deposited title deed of a property in his village in Varanasi as security. Then the petitioner defaulted in payment of instalments. Consequently, Ashok Kumar’s loan account was declared as ‘No...

High Court of Bombay HDFC BANK LTD. v. ASHAPURA MINECHEM LTD. Amendment application should be normally granted unless by virtue of amendment, nature of suit changed or prejudice caused to Defendant Petitioner is objecting to the Order passed by Chairperson of Debt Recovery Appellate Tribunal rejecting appeal preferred by Petitioner-original applicant challenging the Order passed by the Debut Recovery Tribunal rejecting application seeking leave to amend the pleadings. Application tendered by the original applicant has been turned down by the Debt Recovery Tribunal by Order dated 6 October 2016, mainly on the ground that the proposed amendment under which the recovery of additional amount is claimed does not relate back to the date of presentation of original-application. Adverse order passed by Debt Recovery Tribunal was subject matter before Appellate Court where appeal has also been rejected. It is the case of Petitioner that, proposed amendment thus relates to the sub...

SARFAESI Act; Tom Thomas Vs. State Bank of India Overseas Branch, Willington Island [Kerala High Court, 30-11-2016] Contents Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 128. Surety’s liability 140. Rights of surety on payment or performance 141. Surety’s right to benefit of creditor’s securities Bank of Bihar v. Damodar Prasad, AIR 1969 SC 297 Wright v. Simpson, (1802)6 Ves Jun 714 Union Bank of India v. Manku Narayanan, AIR 1987 SC 1978 State of Bank of India v. M/s. Indexport Registered, AIR 1992 SC 1740 Jagannath Ganeshram Agarwala v. Shivnarayan Bhagirath, AIR 1940 Bom. 247 A.P. State Financial Corporation v. M/s. Gar Re-rolling Mills, AIR 1994 SC 2151 Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala, (2009) 9 SCC 478 United Bank of India v. Satyawati Tondon and Others, (2010) 8 SCC 110 Ram Kishan v. State of U.P., (2012 11 SCC 511 Central Bank of India v. Vimla, (2015) 7 SCC 337 1. Applicat...

In Asset Reconstruction Company (India) Ltd. Vs. Florita Buildcon Private Limited, the auction purchaser had successfully bid a secured asset being sold mortgaged property on “as is where is and as is what is basis”. The various terms and conditions forming the part of bid document clearly casted the responsibility and liability on the bidder to ensure that the title of the mortgaged property is verified by the bidder and the property is being sold clearly on “as is where is and as is what is basis”. The purchaser (Respondent No. 1) filed application in the Debts Recovery Tribunal, Mumbai to set aside the sale on the count that the mortgaged property was falling in Coastal Regulation Zone (CRZ) and was a plot reserved for Recreation Ground (RG) and, therefore, there was no saleable interest in the mortgaged property. It was also contended that Respondent No.1 came to know about the same only when Respondent No.1 started erecting shed on the said property. ARCL challenged t...

SARFAESI Act; Eskays Construction Pvt. Ltd. Vs. Soma Papers & Industries Ltd. [Bombay High Court, 30-11-2016] Contents Borrower Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Sick Industrial Companies (Special Provisions) Act, 1985 Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 18. Appeal to Appellate Tribunal Narayan Chandra Ghosh v. UCO Bank, (2011) 4 SCC 548 R.G. Dalpatrai and Co. Vs Bank of Baroda, Writ Petition (L) No.2361 of 2014 decided on 9th October, 2014 General Manager, Sri Siddeshwara Cooperative Bank Ltd. v. Ikbal & Ors., (2013) 10 SCC 83 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 – Section 18 – Appeal to Appellate Tribunal – DRAT has no power or jurisdiction to reduce the deposit amount to less than 25% – Unless the debt due is secured, the borrower cannot be all...