Legal issues related to Banking

Monday, July 21, 2014

HIGHLIGHTS OF BANKING CASES JOURNAL JULY 2014

BC. JULY 2014 Subject Index (Topic Wise)

ADMINISTRATIVE LAW —In matters ofpolicy decisions of Government in respect of economic matters, Courts cannot interfere unless such policy is contrary to Constitution.

Holy star Natural Resources Pvt. Ltd, v. Union of India (Delhi HQ (DB) 233

ALTERNATIVE REMEDY — Enforcement of Security Interest — Secured creditor can proceed against any of the securities and borrower can have no objection — Remedy under Section 17 of Act is an efficacious remedy and High Court should not ordinarily interfere

under Articles 226 and 227 of Constitution [See SARFAES1 Act, 2002—Sections 17,

13(2), (4)]

Santosh Sheetgrah Pvt. Ltd. v. Syndicate Bank & Ors. (Allahabad HQ (DB) 160

APPEAL AGAINST ACQUITTAL — In face of admission of accused that he had issued cheque not as a gift to complainant, but towards purchase of land, accused was obliged to see that cheque was honoured — Faced with prospect ofbeing convicted and there being no defence open, accused may take defence of this type and allege that cheque was issued for something else — If such defences were to be accepted, it would be impossible to achieve object for which Section 13S was brought on statute — Findings of Magistrate thoroughly improbable and unsustainable.

Vithal Tulshidas Zalmi v, Baswaraj Kedarji & Anr, (Bombay HQ 170

ARBITRATION LAW — Commencement of arbitration proceedings — Bank guarantee

— Suit for return of margin money along with interest and cost—Dispute between plaintiff and'MGC' (member 'DSE')—'DSE' failed to andactively opposed any attempt to arbitrate dispute between plaintiff' MGC' —It cannot rely on furnishing of Bank guarantee to secure possible arbitral award to delay its obligation to pay plaintiff sum of Rs. 78 lacs — Counter proforma of Bank guarantee was in tune with parties' obligation under compromise order— There was no reason for 'DSE' to reject that proforma— Observations made by Court do not touch upon validity of'MGC's' claim against plaintiff for an amount of Rs. 3,49,530/

— plus interest -— This has not yet been settled by an arbitral Tribunal as mandated and may be gone into in future m accordance wtih\aw —Tailure to initiate any steps after Order and insistence by 'DSE' that arbitration had been conducted and initiated, relying on previous award which was set aside by AD J, also betrays attempt to block applicant's legitimate rights

— Inaction to commence arbitration proceedings immediately after compromise order of 28.5.2007 means cause of action to do so has become time-barred in view of Section 37 of Arbitration Act, 1940, as well as Section 43 of Arbitration and Conciliation Act, 1996, read

with Section 3 of Limitation Act /See Arbitration and Conciliation Act, 1996 —Sectloit

43]

Delhi Stock Exchange Asson. Ltd. v. Hari Om Maheshwari (Delhi HC) (DB) 172

AUCTION SALE — Conducted by Authorised Officer being pre^ttwiditated and itl fraudulent manner colluding with BMW Industries and respondent No. 6 — Sale vitiated and liable to be quashed — No documentary evidence to show that Authorised Officer had fixed reserve price of property to be sold before sale was conducted — Appellants were unaware of mode of sale to be adopted by Authorised Officer and date of sale —■ Respondent No. 1 after selling the secured assets left residual in the custody of BMW industries — No evidence on record to show that Authorised Officer pubtished any notice informing public at large to sell secured assets by way of private treaty — Secured assets would not have fetched the best possible price [See SARFAESI Act, 2002^Sections 13(2), 13(4), 18]

Coventry Spring & Engineering Co. Ltd. v. ARC I Ltd, (DRAT—Mumbai) (DRAT) 40

—■ Setting aside — Mortgaged Properties — Compromise — Redemption of mortgage — Borrower/mortgagor directed to pay Rs. 5.5 lacs as compensation interest to appellant/ auction purchaser — Besides deposit of said amount of Rs. 5,5 lacs, borrower/mortgagor deposited Rs. 5.5 lacs through pay order with Registrar of DRT-III, Delhi — Since amount of Rs. 5.5 lacs deposited by borrower/mortgagor with State Bank of Patiala for payment to auction purchaser has not been paid to him and lying in deposit with it — Tribunal rightly directed for refund of said amount to borrower—This does not warrant any interference in review — No mistake apparent on face of record is seen in order.

Hem Chand Aggarwal v. Oriental Bank of Commerce (DRA T — Delhi) (DRA T) 37

BENAMI TRANSACTIONS — Prohibition of Benami transaction —■ Suit property claimed by defendants to have been transferred to plaintiff for consideration paid by defendant No. 3 — Suit transaction would be Benami transaction which is prohibited under Section 3(1) of Act—Right to recover property by defendant No. 3 held Benami by plaintiff is prohibited by Section 4 of Act •— In view of prohibition of Benami transaction plaintiffs as owners must be taken to be owners — Court would not be enjoined to consider claim of defendant No. 3 as party who is stated to have provided consideration, actually paid by

BENAMI TRANSACTIONS — Prohibition of Benami transaction (Contd.)

plaintiffs to original land owners [See Benami Transactions (Prohibition) Act, 1988—

Sections 4(1), 3(1)]

Hanif Gulamali Somji v. Purnima Agro Projects Pvt. Ltd. (Bombay HC) 103

CHEATING—Criminal Breach of Trust—Dishonour of Cheque—No document proved to show that any money was entrusted to accused persons — There is heavy transaction of money — Appellate Court rightly found that in absence of any documentary evidence in this

regard only oral evidence could not be relieved upon .[See Indian Penal Code, I860 —

Sections 406, 420]

Raju Mahato v. State of Jharkhand & Ors. (Jharkhand HC) 158

—Dishonour of Cheque—'Account closed' at the instance of Commercial Tax Department in the year 2005—Cheque issued on 10.6.2007—Complaint for offence under Section 13 8, N.I. Act cannot be maintained — Accused acquitted for offence under Section 138 of N.I. Act.

Chandran M. v. Raj anna Gowda (Karnataka HC) 118

COMPANY LAW—Company in liquidation—Release and relinquishment of leasehold rights — Properties mortgaged with Bank - secured creditor — Disposal of — Lease hold rights in respect of plots ■— Settlement of Bank with owners of plot — Permission sought to release mortgaged rights in favour of owners on receipt of Rs. 1.40 crores — DRT already granted permission — Order of Company Court consequential to such permission — Such order necessary as otherwise Official Liquidator or Bank would not be able to fetch any

income from mortgaged property —• No objection raised by Official Liquidator [See

SARFAESIAci, 2602—Sections 13(2), 13(4)]

Nagindas Kgsiitrchand v. Official Liquidator, High Court of Bom. (Bombay HC) 34

COMPROMISE ORDER —■ Commencement of arbitration proceedings—Bank guarantee —■ Suit for return of margin money along with interest and cost—Dispute between plaintiff and 'MGC' (member 'DSE')—'DSE' failed to and actively opposed any attemptto arbitrate dispute between plaintiff'MGC' — It cannot rely on furnishing of Bank guarantee to secure possible arbitral award to delay its obligation to pay plaintiff sum of Rs. 78 lacs — Counter proforma of Bank guarantee was in tune with parties' obligation under compromise order— There was no reason for 'DSE' to reject that proforma -— Observations made by Court do not touch upon validity of'MGC's' claim against plaintiff for an amount of Rs. 3,49,530!

- plus interest—This has not yet been settled by an arbitral Tribunal as mandated and may be gone into in future in accordance with law — Failure to initiate any steps after order and insistence by 'DSE' that arbitration had been conducted and initiated, relying on previous award which was- set aside by ADJ, also betrays attempt to block applicant's legitimate rights [See Civil Procedure Code, 1908 — Order 23 Rule 3]

Delhi Stock Exchange Asson. Ltd. v. Hari Om Maheshwari (Delhi HC) (DB) 172

— Parties cannot revenge from their compromises, transformed through an order of the Court under Order 23 Rule 3, CPC,

Delhi Stock Exchange Asson. Ltd. v. Hari Om Maheshwari (Delhi HC) (DB) 172

CONSTITUTIONAL LAW—Constitutional Limit of Delegated Legislation—Delegation CONSTITUTIONAL LAW — Constitutional Limit of Delegated Legislation (ContiL)

is valid only when legislative policy and guidelines to implement it are adequately laid down and delegate is only empowered to carry out policy within guidelines laid down by Legislature — Legislature cannot delegate essential legislative functions, which consist in determination of or choosing of legislative policy and formally enacting that policy into binding rule of conduct.

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

— Constitutionality of Enactment—Presumption is always in favour of constitutionality of enactment — Burden heavily lies on person who assails constitutionality of provision.

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

— Non-Performing Assets (NPA) — Constitutionality of enactment — Provisions of Section 2(l)(o) of SARFAESI Act and RBI circular dated 1.7.2013 not violative of Arts. 14 and 19(l)(g) of Constitution of India — Petitioner could not place any convincing material to show Section 2(l)(o) of Act and RBI circular dated 1.7.2013 are unreasonable, arbitrary or otherwise repugnant to constitutional principle,

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

—Repugnancy—Gujarat Stamp Act, 1958—Circular dated30.4.2011 issued by respondent No. 3 is held ultra vires provisions of Gujarat Stamp Act and Article 265 of Constitution of India.

Canara Bank v. Collector of Stamps cfe Ors. (Gujarat HC) (DB) 89

CRIMINAL BREACH OF TRUST—Cheating—- Dishonour of Cheque—No document proved to show that any money was entrusted to accused persons — There is heavy transaction of money —Appellate Court rightly found that in absence of any documentary

evidence in this regard only oral evidence could not be relieved upon [See Indian Penal

Code, 1860 — Sections 406, 420]

Rajn Mahato v. State of Jharkhand A Ors. (Jharkhand HC) 158

CRIMINAL TRIAL—Cardinal Rule—Parties at the trial receiving equal fair opportunity, to place respective case before Court by adducing evidence relating to matters in question, as made permissible under provisions of procedural law.

Tikaram v. Shruti Swapnil Choudhary & Anr. (Bombay HC) 257

CROSS-EXAMINATION — Refusal to grant permission — Denial of opportunity to petitioners in putting forth their case before Tribunal to be looked into by DRAT — Permission granted to petitioners to file additional affidavit by way of further evidence of petitioners to proceed in matter in accordance with law.

Shh'aganga Leather Crafts & Ors. v. Canara Bank (Karnataka HC) 70

DISHONOUR OF CHEQUE — Appeal against acquittal — In face of admission of accused that he had issued cheque not as a gift to complainant, but towards purchase of land, accused was obliged to see that cheque was honoured — Faced with prospect of being convicted and there being no defence open, accused may take defence of this type and allege

that cheque was issued for something else [See Negotiable Instruments Act, 1881 —

Section 138}

Vithal Tulshidas Zalmi v. Baswaraj Kedarji & Anr. (Bombay HC) / 70

(342)

Cheating — 'Account closed' at the instance of Commercial Tax Department in the year 2005 — Cheque issued on 10.6.2007 — Complaint for offence under Section 138, N.I, Act cannot be maintained — Accused acquitted for offence under Section 138 of N.I, Act — Appellant to take appropriate steps to approach Court for offence under Section 420, IPC.

Chandran M. v, Rajanna Gowda , (Karnataka HC) 118

— Cheques issued for consideration — Respondent - accused failed to discharge statutory onus placed on him to prove that cheques in question were without consideration — Evidence produced by complainant - appellant clearly proves that sum ofRs. 6,71,326/- was due to complainant—Impugned orders set aside—Respondent - accused is convicted under Section 138 of N.I. Act and sentenced to undergo R.I. for 3 months each in both complaints.

Vijay Power Generators Ltd. v, Annai Engineering Works & Anr. (Delhi HC) 216

— Criminal Breach of Trust — Cheating — No document proved to show that any money was entrusted to accused persons—There is heavy transaction of money—Appellate Court rightly found that in absence of any documentary evidence in this regard only oral evidence could not be relieved upon — No reason for convicting accused persons for offence under Section 420, IPC on same very allegation—No cheque was seized by Investigating Officer nor produced by prosecution — Dishonour of alleged cheque not proved by prosecution — Ingredients for offenpe under Section 138 of N.I. Act could not be proved.

Raju Mahato v. State ofJhariMartd & Ors. (Jharkhand HC) 158

— Ingredients of offence.

Chabi Bhoralee v. State of Assam & Anr, (Gauhati HC) 121

—■ Ingredients required to be fulfilled •— Discussed.

Sri Ajay Sharda v. State of U. P. & Anr. (Allahabad HC) 149

— Issue of Process — Challenge against — Prosecution initiated in spite of payment of demand notice within time — Entirejjn.0unt of cheque paid to payee — Complaint filed to recover Gertain other amounts from applicant which are said to be due and payable by her "to respondent No. 2 — Even if such amounts are due, applicant cannot be prosecuted for Offence under Section 138 of N.l. Act as amount of cheque already paid and conditions requisite for initiating prosecution under Section 138 not fulfilled — Fit case to quash prosecution in exercise of inherent powers. *

Sunita Gajanan G ulawe v. State of Maharashtra & Anr. (Bombay HC) HI

— Joint Trial — Multiple cheques — Single complaint — Maintainability — Ten cheques simultaneously presented to banker on the same day and dishonoured on the same very day —Consolidated notice for all cheques issued calling upon drawer to make good the payment of these cheques, does not suffer from the vice of joinder of many offences in one trial — It cannot be said that ten offences have been committed by the accused and therefore, Section 219, Cr.P.C. does not come into piay,

Charashm Kumar Talwani v. Malhotra Poultries (P&H HC) (DB) 135

— Multiple cheques — Single complaint — Maintainability — In the case of dishonour of multiple cheques presented together forwhieh a consolidated single notice issued, tantamounts (via) BANKING CASES July—2014

DISilONOlillOF CHEQUE—Multiple chequcs— Single complaint — Maintainability (Contd.)

to commission of a single offence under Section 138 after prescribed period of receipt of notice on non-payment of the amount of cheques — A single complaint is maintainable for all these dishonoured cheques.

Char ash ni Kumar Talwani v. Malhotra Poultries (P&H HC) (DB) 135

— Notice — Second notice not sent on correct address—No street number or house number mentioned -— Registered cover received back by complai-nant — No postman examined to prove that respondent refused to receive this registered cover — Not an iota of evidence on record to show legal notice sent on correct address — No presumption that notice has been served upon respondent ■— Impugned judgment correct as per law and upheld.

A jay a Industries v. Gulshan Rai Malhotra (P&H HC) 154

■— Offence by Company — Complaint filed against Managing Director and Director of company without arraigned company as accused — Cheque was issued by company for repayment of loan — Complaint not maintainable in view ofApex Court decision i nAnceta Hada 's case — Conviction set aside.

B.L. Boolani v. Vasanth Kumar Banger a (Karnataka HC) 111

—Offence by Company—Issue of Process—Petitioner is Managing Director of Company and responsible to company for managing its day-to-day affairs — Requirements of provisions of Section 202, Cr.P.C. complied with by Court below in terms of order passed by this Court -— It is for petitioner to prove that he is not liable to be prosecuted on plea that offence was committed without his knowledge or he exercised all due diligence to prevent commission of alleged offence during trial and that Court be adjudged within scope of Section 202, Cr.P.C.

Paw an Kumar Agarwal v. State of West Bengal & Anr. (Calcutta HC) 133

— Offence by Company — Liability of Director — Merely because one is a Director of company is not sufficient to make him liable under Section 141 ofN.I. Act—Director cannot be deemed to be in-charge of and responsible to company for conduct of its business — Specific averments to be made against accused - Director — Cognizance against petitioner quashed,

Chabi Bhoralee v. State of Assam & Anr, (Gauhati HC) 121

— Offence by Company -— Liability of Directors -— Issue of process—- Accused Nos, 3 to 12 were Directors of accused No. 1 - Company — All the accused were in-charge of and responsible for conducting business of accused No. 1 in relation to subject matter of complaint and transaction under offence — There was no error in issue of process-— Applicants may be unable to show that complaint cannot proceed against them — Defences raised may be proved at the time of trial — No justification to discharge applicants.

Salil Dinkarrai Gandhi v. Osmanabad District Central Co-operative Bank Ltd.

(Bombay HC) 206

■— Offence by Company — Territorial jurisdiction — Petitioner was in-charge of and responsible for conduct of affairs of company — If five different acts done in five different localities, anyone of the Courts exercising jurisdiction in one of the five local areas can become place of trial for offence under Section 138 of N.I. Act — Complainant will have (344)

DISHONOUR OF CHEQUE — Offence by Company — Territorial jurisdiction (Conld.)

right in any of the five local areas where cause of action has arisen — Courts having jurisdiction over anyone of the local areas within territorial limits of any of the five acts was done to try the case.

Sri Ajay Sharda v. State ofU.P.& Anr, (Allahabad HC) 149

— Offence by Firm — Notice — Company can be 'drawer' of cheque as Well as juristic person committing offence under Section 138 ■— Notice against firm can be deemed to be a notice against all its instrumentalities—No separate notice needto be issued individually under Section 138(b) against each partner.

Susan Zachariah v, Muthoot Capital Services Ltd. (Kerala HC) 72

— Offence by Firm — Vicarious liability — All partners cannot be held liable for offences committed by firm—Only those partners who were in-charge of and responsible for conduct of business of firm at time of commission of offence alone can be held liable.

Susan Zachariah v. Muthoot Capital Services Ltd. (Kerala HC) 72

— Offence by Firm — Vicarious liability — When offence under Section 138 is committed by a firm and it is proved that offence was committed with the 'consent' or 'connivance' of or is attributable to any 'neglect' on the part of any partner, manager or other officer of firm, he would be deemed guilty of that offence and liable to be proceeded against.

Susan Zachariah v. Muthoot Capital Services Ltd. (Kerala HC) 72

— Offence by Firm — Vicarious liability — No averment that petitioners being partners were in-charge of and were responsible to firm for the conduct of business of firm, at the time when offence was committed—Petitioners will not fall under Section 141 (1)—Complaint against petitioners quashed.

Susan Zachariah v, Muthoot Capital Services Ltd. (Kerala HC) 72

— Offence by Firm — Vicarious liability — When offence under Section 138 is alleged against partner who has not signed cheque and who allegedly consented and connived to issue the cheque, to make that partner vicariously liable for acts of firm, it is obligatory on part of complainant to make specific allegation of 'acts' or conduct, neglect and omission constituting offence — Averment must also contain specific allegation of his acts deeds as to how and in what manner that partner was responsible for conduct of business of firm.

Susan Zachariah v. Muthoot Capital Services Ltd. (Kerala HC) 72

— Offence by Firm — Vicarious liability — When silent partners are specifically <r".eluded from the day-to-day responsibility, they are not liable to be proceeded against, in absence of positive averments indicating their involvement in commission of offence contravening exclusion clause of partnership deed averments in complaint against petitioners do not satisfy statutory requirements under Section 141 —Allegation confined in one sentence with words 'consent' and 'connivance' adopted from section alone does not constitute or disclose offence alleged against them in absence of other 'facts' constituting offence — Complaint against petitioners quashed.

Susan Zachariah v. Muthoot Capital Services Ltd. (Kerala HC) 72

GOVERNMENT CONTRACT — Construction of bus stand — Cancellation of lease agreement — At no stage, appellant had any privity of contract with IDA — 'MPRTC' entered into s B0T contract with appellant contrary to terms and conditions of lease which provided specifically that land shall be used for constructing bus stand-cum-commercial complex — 'MPRTC' had no legal right to create any further right in favour of appellant with regard to receiving of premium on constructed units sold, to third parties — 'MPRTC' would not be in a position to continue with lease as it is heavily indebted presently — Even proposed site where bus stand-cum- commercial complex was to be constructed is under attachment — Claim made by appellant is in nature of damages for breach of contract and/ orrelief ofspecific performance of contract—Appellant willhaveno cause of action against IDA as there is no privity of contract between parties — Lease has come to an end by efflux of time —- Even otherwise, these are issues which would involve adjudication of disputed questions of fact which can only be suitably adjudicated in civil suit as directed by High Court in impugned judgment -— Appellant shall be at liberty to seek its remedies against 'MPRTC' for breach of contract.

Sri Ram Builders v. State of M.P. & Ors. (Supreme Court of India) 186

GUARANTOR'S LIABILITY — Time barred debt — Acknowledgement of debt by principal borrower — Extension of limitation qua guarantor — Continuing guarantee — Acknowledgement of debt by principal borrower waives earlier demands made against guarantors because by acknowledgement executed there is no default of principal borrower

and existence of which is sine qua non for liability of guarantors to commence .[See

Limitation/

Subhash Chand & Anr. v. State Bank of Patiala & Anr. (Delhi HC) 266

INTEREST — Rate of, to be chargeable by Bank — Determination — Default in payment ofEMIs—While contesting S.A., it was Bank's case to be entitled to future interest @ 7.25% p.a. — During proceeding of S.A. before Tribunal also, neither any claim qua compounding of interest made nor interest was claimed @ 27% p.a.—Claim of interest with compounding effect made for the first time before this Tribunal in this appeal is not acceptable — Rate of interest payable by appellants is fixed @ 10% p.a. on reducing balance basis — Appellants directed to pay interest w.e.f. 25.8.2006.

Vikas Vij&Anr. v. Standard Chartered Bank & Ors. (DRAT — Delhi) (DRAT) 7

INTERPRETATION OF STATUTES — Taxing statute —-_Qne and th^onlv proper test would be that the question is not at what transaction the sceriefrtSWuned, but whattransaction its language according to its natural meaning fairly and squarely hits.

Canara Bank v. Collector of Stamps & Ors. . (Gujarat HC) (DB) 89

ISSUE OF PROCESS —Dishonour of Cheque — Offence by Company — Petitioner is Managing Director of Company and responsible to company for managing its day-to-day affairs—Requirements of provisions of Section 202, Cr.P.C. complied with by Court below

in terms of order passed by this Court [See Negotiable Instruments Act, 1881 —

Sections 138, 141]

Pawan Kumar Agarwal v. State of West Bengal & Anr. (Calcutta HC) 133

JUDICIAL REVIEW — Contractual matters — Scope of judicial review is very limited

JUDICIAL REVIEW — Contractual matters — Scope of judicial review (Coittd.)

in contractual matters even where one of contracting parties is State or instrumentality of State — Appellant can seek appropriate relief by way of civil suit—High Court in exercise of its jurisdiction under Article 226 of Constitution of India would not normally grant relief of specific performance of contract.

Sri Ram Builders v. State of M.P. & Ors. (Supreme Court of India) 186

— In fiscal matters and/or where discretion is conferred on high ranking statutory authorities like RBI, Courts do not ordinarily interfere with in exercise of power of judicial review.

Holystar Natural Resources Pvt. Ltd. v. IJnion of India (Delhi HC) (DB) 233

LEGAL MAXIM — "Actus curiae neminem gravabit" — Meaning of— "An act of the Court shall prejudice no one".

Delhi Stock Exchange Asson. Ltd. v. Hari Om Maheshwari (Delhi HC) (DB) 172

LIMITATION — Time barred debt — Acknowledgement of debt by principal borrower —Extension of limitation qua guarantor — Continuing guarantee — Acknowledgement of debt by principal borrower waives earlier demands made against guarantors because by acknowledgement executed there is no default of principal borrower and existence of which is sine qua non for liability of guarantors to commence — Once suit against principal borrower is held to be within limitation, suit against appellants/guarantors is also within limitation, inasmuch as suit is not filed as against appellants/guarantors after 3 years of making of demand after signing of acknowledgement of debt letter dated 21.7.1994.

Subhash Chand & Anr. v. State Bank of Patiala & Anr. (Delhi HC) 266

QUASHING OF PROCEEDINGS — Dishonour of cheque — Power of Attorney — Complaint filed by power of attorney holder of proprietor of firm — He is in-charge of the business ofpayee-complainant firm and is personally aware ofthe transactions—Complaint is signed by him on behalf of the payee-complainant firm — He can be examined as the complainant — Complaint cannot be quashed.

' JL '

Rifakat Ali Choudhar}> v. State of Rajasthan & Anr. (Rajasthan HC) 115

RECALL OF WITNESS—Dishonour of Cheque—Application for examination rejected en ground that application failed to disclose relevancy of evidence proposed to be adduced in case — Impugned order cannot be faulted — In interest of justice, opportunity granted to applicant to apply afresh incorporating reason for which he intends to adduce evidence of witness for which he is seeking summons.

Tikaram v. Shruti Swapnil Choudhary & Anr. (Bombay nC) 257

RECOVERY OF DEBT AMOUNT -— Suit decreed with costs — Suit decided in favour of plaintiff to extent that plaintiff is entitled to recover Rs. 24,90,000/- along with interest

— Interest to be calculated from dates when amounts were debited from account of plaintiff i.e. 29.6.2007 to 31.7.2007 at rate on which Bank would have awarded interest to plaintiff —This has to be as per terms agreed upon between plaintiff and defendant - Bank at the time and in terms of execution of agreement entered for preparation of FDRs — Plaintiff is also entitled to recover sum of Rs. 1,100/- as costs of notice.

Sham Mahajan v. H.P. State Co-operative Bank Ltd. & Anr. (HP HC) 258

RDDBFI — Company in Liquidation — Only DRT has exclusive j urisdiction in respect of subject matter of such recovery proceedings —- Company Court cannot dispose of such immovable property of company in liquidation in favour of Bank and Financial Institutions and distribute sale proceeds thereof — This Court cannot sanction any sale in favour of such secured creditors in respect of properties of company in liquidation.

Nagindas Kasturchand v. Official Liquidator, High Court of Bom. (Bombay HC) 34

— Cross-examination — Denial of opportunity—Matter remitted for reconsideration after permitting cross-examination of AW 1.

Shivaganga Leather Crafts & Ors. v. Canara Bank (Karnataka HC) 70

RBI'S DIRECTIONS AND GUIDELINES -— Have statutory flavour and Banks have to abide by them.

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

SARFAESI — Assignment of debt — Fully governed by provisions of Section 5 of Act •— Section 13 is only for enforcement of security interest — DRT has nothing to do with issue of assignment of debt, while dealing with application of petitioner under Section 17( 1) of Act

— Petitioner unnecessa-rily prolonging the dispute on one pretext or other—Plea on which writ petition filed is completely misconceived •— Costs of Rs. 50,000/- imposed on petitioner.

Rita Machine (I) Ltd. v. DRAT & Ors. (P&H HC) (DB) 81

—Auction Sale — Conducted by Authorised Officer being pre-meditated and in fraudulent manner colluding with BMW Industries and respondent No. 6 — Sale vitiated and liable to be quashed—No documentary evidence to show that Authorised Officer had fixed reserve price of property to be sold before sale was conducted—Appellants were unaware of mode of sale to be adopted by Authorised Officer and date of sale—RespondentNo. 1 after selling the secured assets left residual in the custody of BMW Industries—No evidence on record to show that Authorised Officer published any notice informing public at large to sell secured assets by way of private treaty — Secured assets would not have fetched the best possible price [See SARFAESI Act, 2002—Sections 13(2), 13(4), 18]

Coventry Spring c& Engineering Co.. v. ARCILtd. (DRAT — Mumbai) (DRAT) 40

—Auction Sale — Setting aside — Authorised Officer did not serve any advance notice of 30 days of proposed sale to borrower—Non-compliance of mandatory Rules 6(2) and 8(6) of Rules—Authorised Officer sold immovable suit property without any demarcation with proper mark of identification — Sale is vitiated — If impugned sale is conducted by Authorised Officer in violation of Rules, it cannot be protected in the name of equity .

Soma Papers and Industries Ltd. v. Bank of India (DRAT-—Mumbai) (DRAT) 12

— 'Conveyance' —■ Stamp Duty — Recovery of deficit amount—Order passed by District Magistrate or Chief Metropolitan Magistrate under Section 14 of 2002 Act could not be termed as an⁴ instrument' as defined under Section 2(g), (i) of Gujarat Stamp Act—Noright or liability is created in favour of secured creditor so as to bring it within sweep of definition of'conveyance' as defined in Section 2(g) of 1958 Act — Similarly, Panchnama drawn at the time of taking over of physical possession of secured asset pursuant to order passed by District Magistrate or Chief Metropolitan Magistrate under Section 14 of 2002 Act, would

SARFAESI — 'Conveyance' — Stamp Duty — Recovery of deficit amount (Contd.)

also not create any special right in favour of secured creditor so as to bring such Panchnama within the sweep of definition of term 'instrument' under Section 2(i) of 1958 Act [See

SARFAESI Act, 2002— Sections 13(4), 14]

Canara Bank v. Collector of Stamps & Ors. (Gujarat HC) (DB) 89

— Declaration of account as non-performing asset — Default in repayment of loan amount

— Dispute is between appellant Bank and respondent—State Financial Corporation is not included within definition of'financial institution' given in Section 2(1 )(m) of SARFAESI Act — "Nothing on record to show that respondent is financial institution — Provision of Section 11 of SARFAESI Act not attracted.

State Bank ofPatialav. Haryana State Industrial & Infrastructure Development Corpn. Ltd. (DRA T — Delhi) (DRA T) 9

— Non-Performing Assets (NPA) — Classification of account — Legislature has clearly defined NPA under Section 2(1 )(o) of SARFAESI Act — RBI guidelines are issued to improve quality of assets of Bank and recover public money speedily — No excessive delegation or scope for Banks to act upon basing on their whims and fancies [See SARFAESI Act, 2002— Section 2(1) (o)]

Holystar Natural Resources Pvt. Ltd, v. Union of India (Delhi HC) (DB) 233

— Non-Performing Assets (NPA) — Constitutionality of enactment — Provisions of Section 2(I)(o) of SARFAESI Act and RBI circular dated 1.7.2013 not violative of Arts. 14 and 19(l)(g) of Constitution of India — Petitioner could not place any convincing material to show Section 2(1 )(o) of Act and RBI circular dated 1.7.2013 are unreasonable, arbitrary or otherwise repugnant to constitutional principle,

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

— Non-Performing Assets (NPA) — Declaration of account — Section 2(l)(o) is neither unreasonable nor violative of Arts. 14 and 19(l)(g) of Constitution — Section 2(1 )(o) of SARFAESI Act clearly defines NPA as an asset or an account classified as sub-standard, doubtful or loss asset-—Indian Parliament while enacting SARFAESI Act has not delegated essential legislative function to RBI/Financial Institution with regard to concept of NPA — Impugned circular dated 1.7.2013 issued by RBI which provides guidelines for determining

NPAs, is in conformity with Section 2(l) (o) of SARFAESI Act [See SARFAESI Act, 2002— Sections 2(1) (o), 13(4)]

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

— One Time Settlement — Rejection of request — Declaration of account as Non- Performing Asset—Micro, Small and Medium Enterprises (MSME) Scheme—Entitlement of petitioner to take benefit—Reserve Bank of India guidelines applicable to petitioner — Impugned demand does not refer to reasons based on which decision has been arrived at by respondent-Bank to come to conclusion that petitioner does not fall under category of MSME — Same liable to be quashed — Directions issued to respondent Bank to reconsider case of petitioner taking into consideration materials on record.

Hotel Paraag Ltd. v. State Bank of India (Karnataka HC) 220

— Possession Notice—Invocation of writ jurisdiction to remove locks and setting aside of possession notice—Possession of mortgaged property taken by Bank—Dispute regarding identification of property — Conclusive decision on identification and title of property may require evidence — Respondent No. 1 directed to hand over possession of property sealed within 15 days to petitioner subject to adjudication of title of property from competent DRT

— DRT shall examine evidence to be led and/or documents produced by parties to identify property mortgaged in favour of respondent No. 1 - Bank.

Daljit Kattr v. State Bank of India & Ors. (P&H HC) (DB) 2 71

—Recovery ofhousing loan amount—Petitioner ready to liquidate remaining dues of Bank

— Bank is advised to fix up easy instalments for petitioner to liquidate its dues — Bank shall not take any coercive action till the defaults in payment of instalments,

Ramkrit Ram v. State Bank of India (Patna HC) 129

— Secured Assets — Authorised Officer while selling secured assets has to sell the same in transparent and fair manner which can fetch the best possible price — Borrower should be acquainted with mode of sale, date of sale and reserve price of property.

Coventry Spring de Engineering Co. v. ARC!Ltd. (DRAT— Mumbai) (DRAT) 40

— Security Interest — Enforcement of — Alternative efficacious remedy — Secured creditor can proceed against any of the securities and borrower can have no objection — Remedy under Section 17 of Act is an efficacious remedy and High Court should not ordinarily interfere under Articles 226 and 227 of Constitution — Petitioner has an alternative remedy to adjudicate his grievance against proceedings initiated by respondent- Bank under Section 13(4) by approaching DRT under Section 17 — No good reasons to interfere in matter.

Santosh Sheetgrah Pvt. Ltd. v. Syndicate Bank & Ors. (Allahabad HC) (DB) !60

— Security Interest—Enforcement of— Declaration of company as sick— Suspension of legal proceedings— Non-entitlement— Reference under Section 15 of 1985 Act remains pending— Secured creditors fully empowered to take measures under Section 13(4) of2002 Act in accordance with third proviso to Section 15 of 1985 Act-- Reference cannot be said to be not pending after its registration under Section 15 of 1985Act or after declaration of company as sick unit /See SARFAESI Act, 2002— Sections 13(2), 13(4)}

Uniword Telecom Ltd. & Anr. v. State of U.P. & Ors. (AllahabadHC) (DB) 1

— Security Interest—Enforcement of — Notice—Writ jurisdiction — Secured assets not agricultural land but industrial land where factory of second petitioner existed — First ground raised by petitioners that respondent No. 1 - Bank is not a 'Public Financial Institution' or ' Bank' as defined under Sections 2(m) and 2(c) of Act is neither bona fide nor justified — Process of this Court is invoked only for securing an ex parte interim relief to stall confirmation of sale, which has already taken place — Writ petition is misconceived.

Bommidala Purnaiah Tobacco Pvt. Ltd. v. Export Import Bank of India ' (AP HC) (DB) 62

— Security Interest — Enforcement of — Refund of Amount — Default in repayment of loan amount — Declaration of account as NPA — Appellants are neither borrowers nor

SARFAESI — Security Interest — Enforcement of — Refund of Amount (Contd.)

guarantors or mortgagors of any property qua loan with any of the Banks — Appellants are bona fide purchasers of property in question for value without notice — Alleged equitable mortgage of that property with both Banks is invalid being vitiated by fraud and Court be enforced under provisions of SARFAESI Act—Tribunal below seriously erred in disposing of S.As. filed by appellants by directingthem to make deposits with Bank—Measures taken by both respon dent - Banks for enforcement of its security interest qua-property in question on basis of its alleged mortgage with them were not in accordance with provision of SARFAESI Act and were bad in law — Impugned orders set aside—Appellants entitled for refund of Rs. 10 lacs deposited by them pursuant to Tribunal's order with interest.

Anita & Anr. v. State Dank of India (DRA T — Delhi) (DRA T) 1

— Statement of Objects and Reasons — Main purpose of Act is to enable and empower secured creditors to take possession of their securities and to deal with them without intervention of Court — It aims at expeditious recovery of NPAs of Banks and financial institutions.

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

STAMP DUTY—'Conveyance'—Recovery of deficit amount—Order passed by District Magistrate or Chief Metropolitan Magistrate under Section 14 of 2002 Act couid not be termed as an 'instrument' as defined under Section 2(g), (i) of Gujarat Stamp Act — No right or liability is created in favour of secured creditor so as to bring it within sweep of definition of 'conveyance' as defined in Section 2(g) of 1958 Act — Similarly, Panchnama drawn at the time of taking over of physical possession of secured asset pursuant to order passed by District Magistrate or Chief Metropolitan Magistrate under Section 14 of 2002 Act, would also not create any special right in favour of secured creditor so as to bring such Panchnama within the sweep ofdefinition ofterm 'instrument' under Section 2(i) of i 958 Act—Circular dated 30.4.2011 issued by respondent No. 3 is held ^{tmmres provisions of Gujarat Stamp

Act and Article 265 of Constitution of India [See SARFAESI Act, 2002— Sections

13(4), 141

Canara Bank v. Collector of Stamps & Ors. (Gujarat HC) (DB) 89

STATE FINANCIAL CORPORATIONS — Possession of mortgaged properties — Restoration of possession — Petitioner is not borrower but auction purchaser—Impugned

action of respondents under Section 29 of Act is quashed [See State Financial

Corporations Act, 1951 — Section 29]

Ramesh Chander v. Punjab Financial Corporation & Anr. (P&H HC) (DB) 263

TAXATION — Principles—Taxing or fiscal statute demands strict construction — Rule ¹ of construction of a charging section is that before taxing a person it must be shown that he falls within the ambit thereof by clear words used as no one can be taxed by implication.

Canara Bank v. Collector of Stamps <4 Ors. (Gujarat HC) (DB) 89

TENDER — Bid — Rejection — Lack of sufficient experience — Supply of security holograms to Excise Department — Five years' experience in use of origination systems — Eligibility criteria not fulfilled — Petitioner chose to bid for tender even when it was fully aware that it was not eligible — Vague allegations of mala fide cannot be held against respondents — Petitioner not entitled to any relief.

Uflex Ltd. v. State of Sikkim & Ors. (Sikkim HC) 224

•— Doctrine of waiver and acquiescence — After having participated in tender process, it is not permissible for party to raise objections.

Uflex Ltd. v. State of Sikkim & Ors. "" (Sikkim HC) 224

—Notice Inviting Tender—Extension of time for submitting and opening of technical bids

— Production of requisite documents as per requirements authorities not possible on short notice — Time extended for 10 days for submitting and opening of Technical Bids.

G.L. Agarwalla v. State of Meghalaya & Ors. (Meghalaya HC) 120

TEST OF REASONABLENESS ■— Application of — Criteria is whether law strikes a proper balance between social contract on one hand and rights of individual on the other hand.

Holystar Natural Resources Pvt. Ltd. v. Union of India (Delhi HC) (DB) 233

WORDS AND PHRASES —'Person' — Meaning of— Word 'person* includes any company or association or body of person whether incorporated.

Susan Zachariah v. Muthoot Capital Services Ltd. (Kerala HC) 72

— 'Security Interest', 'Collateral Security' -— Meaning of.

Santosh Sheetgrah Pvt. Ltd. v. Syndicate Bank & Ors. (Allahabad HC) (DB) 160

WRIT JURISDICTION — Correctness or otherwise of the order need not be gone into at this stage.

Shivaganga Leather Crafts & Ors. v. Canara Bank (Karnataka HC) 70

—Enforcement of Security Interest — Notice — Secured assets not agricultural land but industrial land where factory of second petitioner existed — First ground raised by petitioners that respondent No. 1 - Bank is not a 'Public Financial Institution' or 'Bank' as defined under Sections 2(m) and 2(c) of Act is neither bonafide nor justified — Process of this Court is invoked only for securing an ex parte interim relief to stall confirmation of sale, which has already taken place — Writ petition is misconceived.

Bommidala Purnaiah Tobacco Pvt. Ltd. v. Export Import Bank of India

(AP HC) (DB) 62

— Quashing and setting aside of order passed by DRT — Violation of principles of natural justice — No effective hearing given to petitioner before delivering judgment — Matter remitted to DRT to decide afresh after taking into consideration submissions of both parties.

Pradeep Kumar v. Debt Recovery Tribunal & Ors. (Jharkhand HC) 143

— Scope of powers and restrictions in exercise of such power — Availability of alternative remedy does not operate as an absolute bar to entertain writ petition.

Canara Bank v. Collector of Stamps & Ors. (Gujarat HC) (DB) 89

United Bank of India vs. Satyawati Tondon & Ors. 2010 (8) SCC 110: 2010 (9) SCR 1

SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT, 2002:

s.13(8) - Right of borrower - Held: The provision contained in s.13(8) is specifically for the protection of the borrowers in as much as, ownership of the secured assets is a constitutional right vested in the borrowers and protected u/Article 300A of the Constitution - Therefore, the secured creditor as a trustee of the secured asset cannot deal with the same in any manner it likes and such an asset can be disposed of only in the manner prescribed in the SARFAESI Act - Therefore, the creditor should ensure that the borrower was clearly put on notice of the date and time by which either the sale or transfer will be effected in order to provide the required opportunity to the borrower to take all possible steps for retrieving his property - Such a notice is also necessary to ensure that the process of sale will ensure that the secured assets will be sold to provide maximum benefit to the borrowers - The notice is also necessary to provide the required opportunity to the borrower to take all possible steps for retrieving his property or at least ensure that in the process of sale the secured asset derives the maximum benefit and the secured creditor or anyone on its behalf is not allowed to exploit the situation of the borrower by virtue of the proceedings initiated under the SARFAESI Act - Constitution of India, 1950 - Article 300A.

s.13 - Sale of Non performing asset - Sale consideration only Rs.10,000 above the reserve price whereas property worth much more - Held: The secured creditors are expected to take bonafide measures to ensure that there is maximum yield from such secured assets for the borrowers - Sale null and void being in violation of provisions of s.13 and rr.8 and 9 and liable to be set aside - Security Interest (Enforcement) Rules, 2002 - rr.8 and 9.

s.13 - Sale of Non performing asset - Single judge of the High Court after holding that the sale was invalid as there was violation of rules, directed making of payments by borrowers to the Bank with clear direction that on such payment, insofar as the bank is concerned its dues would be settled - Not only borrowers made the payment as directed which was accepted by bank, the Bank even accepted the said judgment and did not file any appeal there against - Only the buyer filed the appeal - In the facts of the case, once the payment is made to the buyer by borrowers the possession of the property shall be delivered to the borrowers with no further liability towards the bank.

SECURITY INTEREST (ENFORCEMENT) RULES, 2002:

rr.8 and 9 - Held: Any sale effected without complying with the rules would be unconstitutional and null and void.

r.8(8) - Sale by any method other than public auction or public tender shall be on such terms as may be settled between the parties in writing - In the instant case, no terms were settled between the parties that the
sale can be effected by Private Treaty - The Borrowers were not even called to the joint meeting between the Bank and the Sale Agent - There was violation of rules rendering the sale void.

Respondent no.1 and 2 had taken various loans from respondent no.3-Bank. Upon failure of respondent no.1 and 2 to repay the loan, their assets mortgaged with respondent no.3-Bank were classified as Non-Performing Assets. Respondent no.3-Bank issued a demand notice and then a possession notice under the SARFAESI Act. Respondent no.1 and 2 challenged the two notices before the High Court. Meanwhile, auction sale was fixed but no sale took place as there were no bidders. Respondent no.1 and 2 sought cancellation of auction notice and sought permission of respondent no3-Bank to sell the secured assets by private treaty. The outstanding balance to the bank was Rs.1.57 crores.

Respondent Nos.1 and 2 made a payment of Rs.42 lacs to respondent no.3-Bank, by selling machinery with the permission of respondent no.3-Bank. A request was also made for an extension of two months for paying the remaining amount after selling the secured assets. Respondent no.3-Bank gave approval for private sale of the immovable property and the secured assets were sold in favour of the appellant for a consideration of 123.10 lacs. The sale was affected through Ge-Winn Management Company, Resolution Agents.

The reserve price of the secured assets was fixed at 123 lacs. Sale deed was executed in favour of the appellants by respondent No.3 on 20th December, 2006, as the entire consideration was paid on 15th December, 2006. On 21st December, 2006, respondent Nos.1 and 2 were informed by respondent No.3-Bank that the secured assets had been sold for more than the amount offered by them. Respondent Nos.1 and 2 filed writ petition without disclosing that the earlier writ petition challenging the auction notice had been withdrawn without the court giving liberty to respondent Nos. 1 and 2 to file a fresh writ petition.

The single judge of the High Court allowed the writ petitions. The sale in favour of the appellant was held to be vitiated on the ground that respondent No.3-Bank failed to follow the mandatory provisions of Rules 8(5), 8(6) and 9(2) of the Security Interest (Enforcement) Rules, 2002. But a direction was issued to refund the amount paid by the petitioner i.e. Rs.1crore 41 lacs with interest at 9% per annum from April, 2007. The
Division Bench of the High Court upheld the order of the single judge. The instant appeals were filed challenging the order of the High Court.

Disposing of the appeals, the Court

HELD: 1. The findings recorded by the High Court that there has been a

violation of Security Interest (Enforcement) Rules, 2002 were perfectly

justified. The provision contained in Section 13(8) of the SARFAESI Act,

2002 is specifically for the protection of the borrowers in as much as,

ownership of the secured assets is a constitutional right vested in the

borrowers and protected under Article 300A of the Constitution of India.

Therefore, the secured creditor as a trustee of the secured asset can not

deal with the same in any manner it likes and such an asset can be disposed

of only in the manner prescribed in the SARFAESI Act, 2002. Therefore, the

creditor should ensure that the borrower was clearly put on notice of the

date and time by which either the sale or transfer will be effected in

order to provide the required opportunity to the borrower to take all

possible steps for retrieving his property. Such a notice is also

necessary to ensure that the process of sale will ensure that the secured

assets will be sold to provide maximum benefit to the borrowers. The

notice is also necessary to ensure that the secured creditor or any one on

its behalf is not allowed to exploit the situation by virtue of proceedings

initiated under the SARFAESI Act, 2002. In view of Rules 8 and 9(1), any

sale effected without complying with the same would be unconstitutional

and, therefore, null and void. In the present case, there is an additional

reason for declaring that sale in favour of the appellant was a nullity.

Rule 8(8) states that sale by any method other than public auction or

public tender, shall be on such terms as may be settled between the parties

in writing. There were no terms settled in writing between the parties

that the sale can be affected by Private Treaty. In fact, the borrowers -

respondent Nos. 1 and 2 were not even called to the joint meeting between

the Bank - Respondent No.3 and Ge-Winn held on 8th December, 2006.

Therefore, there was a clear violation of the aforesaid Rules rendering the

sale illegal. Generally proceedings under the SARFAESI Act, 2002 against

the borrowers are initiated only when the borrower is in dire-straits. The

provisions of the SARFAESI Act, 2002 and the Rules, 2002 have been enacted

to ensure that the secured asset is not sold for a song. It is expected

that all the banks and financial institutions which resort to the extreme

measures under the SARFAESI Act, 2002 for sale of the secured assets to

ensure, that such sale of the asset provides maximum benefit to the

borrower by the sale of such asset. Therefore, the secured creditors are

expected to take bonafide measures to ensure that there is maximum yield

from such secured assets for the borrowers. In the present case, sale

consideration is only Rs.10,000/- over the reserve price whereas the

property was worth much more. The sale is null and void being in violation

of the provision of Section 13 of the SARFAESI Act, 2002 and Rules 8 and 9

of the Rules, 2002. The sale effected in favour of the appellants on 18th

December, 2006 is liable to be set aside. [paras 11, 13 to 18]

Mathew Varghese vs. M.Amritha Kumar & Ors. 2014 (2) Scale 331 - relied on.

2. The borrowers -Respondent No.1 and 2 had evaluated the property at

Rs.117 lakhs which was acknowledged in their letter dated 28th August,

2006. Therefore, the reserve price was fixed based upon the said figures.

The appellants bought the property for more than the reserve price. The

appellants paid the entire consideration within three days of the sale,

i.e., on 15th December, 2006. The Sale Deed was executed in their favour

on 20th December, 2006. Possession was admittedly delivered on 20th

December, 2006 also. The appellants have also incurred substantial loss as

they have been unnecessarily dragged into litigation. [Para 21]

3. The single judge of the High Court after holding that the sale in

question was invalid, directed making of payments by respondent Nos. 1 and

2 to respondent No.3 bank with clear direction that on such payment,

insofar as the bank is concerned its dues shall stand settled. Not only

respondent Nos. 1 and 2 made the payment as directed which was accepted by

respondent No.3 bank, insofar as respondent No.3 bank is concerned it even

accepted the said judgment and did not file any appeal thereagainst. Only

the appellant filed the appeal. Though the order of the Single Judge about

the validity of the sale had been affirmed, the Division Bench interfered

with the other direction of the Single Judge which should not have been

done as bank had not challenged the order of the Single Judge. In the

facts of this case, once the payment is made to the appellant by respondent

Nos.1 and 2, the possession of the property shall be delivered to the

respondent Nos.1 and 2 with no further liability towards the bank. [para

27]

4. The sale in favour of the appellants and the subsequent delivery of

possession to the appellants is null and void. The sale is accordingly set

aside. The appellants are directed to deliver the possession of the

property purchased by them under the Sale Deed dated to Respondent Nos. 1

and 2 immediately upon receiving the entire amount; Respondent No.3

directed to refund the entire proceeds of the FDR in which the sale

consideration was deposited together with accrued interest forthwith.

Respondent Nos. 1 and 2 will ensure that the entire amount due to the

appellants is paid on or before 15th June, 2014. Upon receipt of the

entire amount, the possession shall be delivered to Respondent Nos. 1 and

2. [Para 28]

United Bank of India vs. Satyawati Tondon & Ors. 2010 (8) SCC 110: 2010 (9)

SCR 1 - referred to.

CASE LAW REFERENCE

2010 (9) SCR 1 referred to. Para 4

2014 (2) Scale 331 relied on Para 12

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 3865 OF 2014

(Arising out of S.L.P.(C) No.24915 of 2011)

J.Rajiv Subramaniyan & Anr. …Appellants

VERSUS
M/s. Pandiyas & Ors. ...Respondents
WITH
CIVIL APPEAL NO. 3866 OF 2014
(Arising out of S.L.P.(C) No.25448 of 2012)

J U D G M E N T

SURINDER SINGH NIJJAR,J.
1. Leave granted.
2. These special leave petitions are directed against the final
judgment and order dated 14th June, 2011 passed by the Madras High
Court (Madurai Bench) in W.A.No.417 of 2011 dismissing the aforesaid
Writ Appeal filed by the appellants.
3. We have heard the learned counsel for the parties at length.
4. Mr. Ashok Desai learned senior counsel appearing on behalf of the
appellants has submitted that although many issues have been raised in
the SLP, he is not pressing the point that the High Court erred in
entertaining the writ petition filed by respondent Nos.1 and 2. The
point with regard to the maintainability of the writ petition was
taken on the basis of a judgment of this Court in the case of United
Bank of India vs. Satyawati Tondon & Ors.[1]. It was urged before the
High Court that an alternative remedy being available to respondent
Nos.1 and 2 under the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (hereinafter
referred to as “SARFAESI Act, 2002), the writ petition would not be
maintainable. The second issue with regard to the maintainability was
based on the fact that earlier respondent Nos. 1 and 2 had filed Writ
Petition Nos.5027-28 of 2006 challenging the auction sale notice dated
23rd May, 2006. However, these writ petitions were withdrawn on 3rd
July, 2006. The High Court did not give any liberty to respondent Nos.
1 and 2 to file fresh writ petition. Mr. Desai very fairly submitted
that it is not necessary to examine the issues on maintainability of
the writ petition, as the entire issue is before this Court on merits.

5. Mr. Ashok Desai has pointed out that respondent Nos.1 and 2 had
taken various loans from respondent No.3-Bank. Upon failure of
Respondent Nos. 1 and 2 to repay the loan, the assets of respondent
Nos.1 and 2 which had been mortgaged with respondent No.3-Bank were
classified as non-performing assets (NPA). Inspite of such action
having been taken by respondent No.3-Bank, respondent Nos.1 and 2
failed to regularize the bank account. Therefore, on 8th June, 2005,
the bank-respondent No.3 issued notice under Section 13(2) of the
SARFAESI Act, 2002 followed by a possession notice on 12th January,
2006 under Section 13(4) of the said Act. Respondent Nos.1 and 2
challenged the aforesaid two notices by filing Writ Petition Nos.
4174/2006, 4175/2006, 5027/2006 and 5028/2006. In the meantime,
auction sale was fixed on 7th July, 2006. But no sale took place as
there were no bidders. On 28th August, 2006, respondent Nos.
1 and 2 sought cancellation of the auction notice and sought
permission of respondent No.3-Bank to sell the secured assets by
private Treaty. It was stated that as on that date the outstanding
balance due to the bank was a sum of Rs.1.57 crores. A request was
made to break up the aforesaid amount as follows :
(a) Machineries of M/s. Suruthi Fabrics - 0.40 lacs
(b) Land and building of M/s. Suruthi Fabrics - 0.70 lacs
(c) Pandias Garment Factory land and Building - 0.47 lacs
And Suruthi Fabrics 5.51 acres Land

6. Permission was sought to sell the assets as stated above within
six months. On 11th September, 2006, respondent Nos.1 and 2 made a
payment of Rs.42 lacs to respondent No.3-Bank, by selling machinery
with the permission of respondent No.3-Bank. A request was also made
for an extension of two moths for paying the remaining amount after
selling the secured assets. On 8th December, 2006, respondent No.3-
Bank gave approval for private sale of the immovable property to the
appellants and for issue of sale certificate. On the very same date,
the secured assets were sold in favour of the petitioner for a
consideration of 123.10 lacs. It is not disputed by Mr. Vikas Singh,
learned senior counsel appearing for Respondent No.3, that the sale
was affected through Ge-Winn Management Company, Resolution Agents.
This is also evident from the proceedings of the meeting held between
respondent No.3-Bank and Ge-Winn on 8th December, 2006.

7. We may point out here that the reserve price of the secured
assets was fixed at 123 lacs. Sale deed was executed in favour of the
appellants by respondent No.3 on 20th December, 2006, as the entire
considerations have been paid on 15th December, 2006. On 21st
December, 2006, respondent Nos.1 and 2 were informed by respondent
No.3-Bank that the secured assets had been sold for more than the
amount offered by them in the letter dated 28th August, 2006. At that
stage, respondent Nos.1 and 2 filed Writ Petition No.325 of 2007
without disclosing that the earlier Writ Petition Nos.5027-28/2006
challenging the auction notice dated 23rd May, 2006 had
been withdrawn without the court giving liberty to respondent Nos. 1
and 2 to file a fresh writ petition.

8. Upon completion of the proceedings inspite of the preliminary
objections taken by the appellants, the learned Single Judge allowed
the writ petitions. The sale in favour of the petitioner was held to
be vitiated on the ground that respondent No.3-Bank failed to follow
the mandatory provisions of Rules 8(5), 8(6) and 9(2) of the Security
Interest (Enforcement) Rules, 2002 (hereinafter referred to as ‘Rules,
2002’). But a direction was issued to refund the amount paid by the
petitioner i.e. Rs.1crore 41 lacs with interest at 9% per annum from
April, 2007.

9. Aggrieved by the aforesaid order, the appellants filed Writ
Appeal No.4127/2011 in the High Court, which has also been dismissed.

10. Mr. Ashok Desai submits that the petitioner is a bona fide
purchaser and has paid the full consideration. Sale deed has been duly
executed. Possession of the property is with the appellants since
2006. Therefore, respondent Nos.1 and 2 should not be permitted at
this stage to claim that the sale is vitiated on the ground that it
has been affected through an agent of respondent No.3-Bank, namely, Ge-
Winn. Mr. Desai submitted that the Single Judge as well as the
Division Bench have wrongly held that there has been violation of
Rules 8(5), 8(6), 8(8) and 9(2) of the Rules, 2002. Mr. Desai further
submitted that it would be equitable to permit the petitioner to keep
the plot which is adjacent to the property of the petitioner.
Respondent Nos.1 and 2 can be permitted to take the other plots.

11. Mr. Dhruv Mehta, learned senior counsel appearing on behalf of the
respondent Nos. 1 and 2 relying on the judgment of this Court in
Mathew Varghese Vs. M.Amritha Kumar & Ors. in C.A.No.1927-1929 of 2014
decided on 10th February, 2014 submits that the Rules, 2002 are
mandatory in nature. In the present case, the sale has been effected
in violation of the aforesaid rules. Both the learned Single Judge as
well as the Division Bench have come to the conclusion that the
provisions of the aforesaid rules have not been followed. It is not
disputed by any of the parties that there is no agreement between
respondent Nos. 1 and 2 and respondent No.3-Bank, in writing, to
affect the sale by Private Treaty. Mr. Vikas Singh, learned
senior counsel appearing for respondent No.3-Bank, however, pointed
out that the respondent Nos.1 and 2 had filed a review petition in
which it was averred that they may be permitted to sell the secured
assets by Private Treaty. Therefore, according to Mr. Vikas Singh,
respondent Nos. 1 and 2 cannot now be heard to say that they had not
given their consent to affect the sale by Private Treaty. We are
unable to accept the submission made by Mr. Vikas Singh that there is
no violation of the Rules, 2002. In our opinion, the findings recorded
by the learned Single Judge as well as the Division Bench of the High
Court that there has been a violation of Rules, 2002 are perfectly
justified.

12. This Court in the case of Mathew Varghese Vs. M.Amritha Kumar &
Ors.[2] examined the procedure required to be followed by the banks or
other financial institutions when the secured assets of the borrowers
are sought to be sold for settlement of the dues of the
banks/financial institutions. The Court examined in detail the
provisions of the SARFAESI Act, 2002. The Court also examined the
detailed procedure to be followed by the bank/financial institutions
under the Rules, 2002. This Court took notice of Rule 8, which
relates to Sale of immovable secured assets and Rule 9 which relates
to time of sale, issue of sale certificate and delivery of possession
etc. With regard to Section 13(1), this Court observed that Section
13(1) of SARFAESI Act, 2002 gives a free hand to the secured creditor,
for the purpose of enforcing the secured interest without the
intervention of Court or Tribunal. But such enforcement should be
strictly in conformity with the provisions of the SARFAESI Act, 2002.
Thereafter, it is observed as follows:-
“A reading of Section13(1), therefore, is clear to the effect
that while on the one hand any SECURED CREDITOR may be entitled
to enforce the SECURED ASSET created in its favour on its own
without resorting to any court proceedings or approaching the
Tribunal, such enforcement should be in conformity with the
other provisions of the SARFAESI Act.”

13. This Court further observed that the provision contained in
Section 13(8) of the SARFAESI Act, 2002 is specifically for the
protection of the borrowers in as much as, ownership of the secured
assets is a constitutional right vested in the borrowers and protected
under Article 300A of the Constitution of India. Therefore, the
secured creditor as a trustee of the secured asset can not deal with
the same in any manner it likes and such an asset can be disposed of
only in the manner prescribed in the SARFAESI Act, 2002. Therefore,
the creditor should ensure that the borrower was clearly put on notice
of the date and time by which either the sale or transfer will be
effected in order to provide the required opportunity to the borrower
to take all possible steps for retrieving his property. Such a notice
is also necessary to ensure that the process of sale will ensure that
the secured assets will be sold to provide maximum benefit to the
borrowers. The notice is also necessary to ensure that the secured
creditor or any one on its behalf is not allowed to exploit the
situation by virtue of proceedings initiated under the SARFAESI Act,
2002. Thereafter, in Paragraph 27, this Court observed as follows:-

“27. Therefore, by virtue of the stipulations contained under
the provisions of the SARFAESI Act, in particular,
Section 13(8), any sale or transfer of a SECURED ASSET, cannot
take place without duly informing the borrower of the time and
date of such sale or transfer in order to enable the borrower to
tender the dues of the SECURED CREDITOR with all costs, charges
and expenses and any such sale or transfer effected without
complying with the said statutory requirement would be a
constitutional violation and nullify the ultimate sale.”

14. As noticed above, this Court also examined Rules 8 and 9 of the
Rules, 2002. On a detailed analysis of Rules 8 and 9(1), it has been
held that any sale effected without complying with the same would be
unconstitutional and, therefore, null and void.
15. In the present case, there is an additional reason for declaring
that sale in favour of the appellant was a nullity. Rule 8(8) of the
aforesaid Rules is as under:-
“Sale by any method other than public auction or public tender,
shall be on such terms as may be settled between the parties in
writing.”

16. It is not disputed before us that there were no terms settled in
writing between the parties that the sale can be affected by Private
Treaty. In fact, the borrowers – respondent Nos. 1 and 2 were not
even called to the joint meeting between the Bank – Respondent No.3
and Ge-Winn held on 8th December, 2006. Therefore, there was
a clear violation of the aforesaid Rules rendering the sale illegal.

17. It must be emphasized that generally proceedings under the
SARFAESI Act, 2002 against the borrowers are initiated only when the
borrower is in dire-straits. The provisions of the SARFAESI Act, 2002
and the Rules, 2002 have been enacted to ensure that the secured asset
is not sold for a song. It is expected that all the banks and
financial institutions which resort to the extreme measures under the
SARFAESI Act, 2002 for sale of the secured assets to ensure, that such
sale of the asset provides maximum benefit to the borrower by the sale
of such asset. Therefore, the secured creditors are expected to take
bonafide measures to ensure that there is maximum yield from such
secured assets for the borrowers. In the present case, Mr. Dhruv
Mehta has pointed out that sale consideration is only Rs.10,000/- over
the reserve price whereas the property was worth much more. It is not
necessary for us to go into this question as, in our opinion, the sale
is null and void being in violation of the provision of Section 13 of
the SARFAESI Act, 2002 and Rules 8 and 9 of the Rules, 2002.

18. We, therefore, have no hesitation in upholding the judgments of
the learned Single Judge and the Division Bench of the High Court to
the effect that the sale effected in favour of the appellants on 18th
December, 2006 is liable to be set aside.

19. This now brings us to moulding the relief in the peculiar facts
and circumstances of this case.

20. As noticed earlier, Mr. Ashok Desai had emphasized on behalf of
the appellants that no blame at all can be attributed to them. The
bank had decided to sell the immovable properties to the appellants
for Rs.1,23,10,000/- against the reserve price of Rs.1,23,00,000.
This is evident from the joint meeting of the bank held with Ge-Winn
on 10th December, 2006, wherein it is observed as follows:-
“Referring to the above in the presence of the undersigned it
has been decided to effect the sale to M/s. Susee Automobiles
Pvt. Ltd., Madurai and Smt. Nirmala Jeyablan, W/o Shri
Jayabaaalan, No.4, S.V. Nagar, S.S. Colony, Madurai for a
consideration of Rs.123.10 lakhs (Rupees one crore twenty three
lakhs and ten thousand only) against the reserve price of
Rs.123.00 lakhs and issue Sale Certificate for registration
under private treaty.”

21. Mr. Desai had also pointed out that the borrowers -Respondent No.1
and 2 had evaluated the property at Rs.117 lakhs. The evaluation was
acknowledged by Respondent Nos. 1 and 2 in the letter dated
28th August, 2006. Therefore, the reserve price was fixed based
upon the aforesaid figures. The appellants bought the property for
more than the reserve price. The appellants paid the entire
consideration within three days of the sale, i.e., on 15th December,
2006. The Sale Deed was executed in their favour on 20th December,
2006. Possession was admittedly delivered on 20th
December, 2006 also. The appellants have also incurred substantial
loss as they have been unnecessarily dragged into litigation. He
pointed out that the appellants have in fact incurred losses of
Rs.3 crores as they were deprived of using the property in view of the
interim orders passed by the High Court and they were forced to take
other property on monthly rent of Rs.3 lakhs from January 2007. He,
therefore, submitted that the proposal made by the appellants for
being permitted to keep the plot adjacent to the property already
owned by them, be accepted. In the alternative, learned senior
counsel submitted that the High Court has unnecessarily reduced the
amount of interest on the amount deposited by the appellants with the
bank would bear only 4% interest. He submitted that the appellants
are entitled to 18% compound interest since the date the amount was
deposited till refund.

22. On the other hand, Mr. Dhruv Mehta pointed out that property of
Respondent No.1 has been sold for a ridiculously low price, as the
bank is interested only in regularizing the account of the borrower.
He has submitted that respondent Nos. 1 and 2 are prepared to
compensate the appellants, to a reasonable extent, but not to the
extent claimed by Mr. Desai.

23. On the other hand, Mr. Vikas Singh has submitted that in case
the sale is to be set aside and the properties have to be returned to
the borrowers, the dues of the bank also have to be secured, which are
now in the region of Rs.4 crores.

24. We have considered the submissions made by the learned counsel for
the parties.

25. Initially on our suggestion, respondent Nos. 1 and 2 had
quantified the amount in accordance with the directions issued by the
learned Single Judge. The learned Single Judge had ordered refund of
Rs.1,41,00,000/-, (Representing Rs.1,23,10,000/- towards Sale Price
and Rs.18,90,000/- towards Stamp Duty with interest @9% per annum from
April 2007). However, since we had accepted the second alternative
(partially) of Mr. Ashok Desai, the appellants and respondents have
jointly submitted the following chart:-
|Amount quantified by the |Interest@ 18% |Total |
|Learned Single Judge |from April 2007 | |
| |to 15.06.2014 | |
|Rs. 1,41,00,000/- |Rs. 1,84,00,500/-|Rs. 3,25,00,500/- |
|Rs. 1,23,10,000/- Sale Price| | |
|Rs. 18,90,000/- (Stamp Duty)| | |

26. Mr. Dhruv Mehta has stated that Respondent Nos. 1 and 2 are
prepared to refund the sale amount paid by the appellants as Sale
Price together with 18% simple interest from 1st July, 2007 till 15th
June, 2014. The total amount spent on Stamp Duty shall also be
refunded to the appellants. The total amount shall be paid to the
appellants by 15th June, 2014. Mr. Desai had pointed out that the
amount deposited with the bank, which is said to be lying in a FDR
Bearing 8.25% per annum ought to be refunded by the bank to the
appellants. Upon the entire amount being repaid to the appellants,
the possession of the property purchased by the appellants will be
delivered to the Respondent Nos.1 and 2.
27. Insofar as the submission of Mr. Vikas Singh learned senior
counsel is concerned we are unable to accept the same in the facts
and circumstances of this case It would be relevant to point out that
the learned Single Judge of the High Court after holding that the sale
in question was invalid, directed making of payments by respondent
Nos. 1 and 2 to respondent No.3 bank with clear direction that on such
payment, insofar as the bank is concerned its dues shall stand
settled. Not only respondent Nos. 1 and 2 made the payment as
directed which was accepted by respondent No.3 bank, insofar as
respondent No.3 bank is concerned it even accepted the said judgment
and did not file any appeal thereagainst. Only the appellant filed
the appeal. Though the order of the learned Single Judge about the
validity of the sale had been affirmed, the Division Bench interfered
with the other direction of the learned Single Judge which should not
have been done as bank had not challenged the order of the learned
Single Judge. We are, therefore, of the opinion that in the facts of
this case, once the payment is made to the appellant by respondent
Nos.1 and 2 in the manner stated hereinafter, the possession of the
property shall be delivered to the respondent Nos.1 and 2 with no
further liability towards the bank
28. In view of the aforesaid, we hold that the sale in favour of
the appellants dated 18th December, 2006 and the subsequent delivery
of possession to the appellants is null and void. The sale is
accordingly set aside. The appellants are directed to deliver the
possession of the property purchased by them under the Sale Deed dated
20th December, 2006 to Respondent Nos. 1 and 2 immediately upon
receiving the entire amount as directed hereunder:-
(i) The State Bank of India – Respondent No.3 directed to refund the
entire proceeds of the FDR in which the sale consideration was
deposited together with accrued interest forthwith.
(ii) The Respondent Nos. 1 and 2 will ensure that the entire amount
due to the appellants is paid on or before 15th June, 2014.
(iii) Upon receipt of the entire amount, the possession shall be
delivered to Respondent Nos. 1 and 2.
29. With these observations, the appeals are disposed of with no order
as to costs.

….………………………..J.
[Surinder Singh Nijjar]

…………………………..J.
[A.K.Sikri]
New Delhi;
March 14, 2014.

-----------------------
[1] [2010 (8) SCC 110]
[2] 2014 (2) Scale 331

-----------------------
19

SC allowed lenders to publish names & photographs of wilful defaulters - SBI vs. DJ Exim

“In a move that may discourage firms from defaulting on bank loans, the Supreme Court has allowed lenders to publish names and photographs of wilful defaulters in newspapers in the larger public interest. The apex court said that the decision to resort to this measure would be taken by officers of the rank of general managers and above.

By giving the ruling on the matter, a bench headed by justice Fakkir Mohamed Ibrahim Kalifulla upheld the Bombay High Court’s November 2013 order that allowed State Bank of India (SBI) to publish names and photographs of directors and guarantors of Mumbai-based defaulter firm DJ Exim (India) in newspapers on the grounds that Rule 8 framed under the Securitisation Act specifically authorised the banks to publish the names and addresses of wilful defaulters and there is also no legal bar that prohibits them from publishing such information. The SC accepted the bank’s stand that the move does not violate the defaulter’s right to privacy as the same is not absolute. From the bank’s point of view, the duty to maintain secrecy is superseded by a larger public interest as well as by the bank’s own interest under certain circumstances, it held.”

Submitted for your kind information , please.

Source: The Financial Express , July 17, 2014. (Full Text of the judgment yet to receive)

Saturday, May 31, 2014

THE DEBTS RECOVERY APPELLATE TRIBUNAL (PROCEDURE) RULES,1994

In exercise of the powers conferred by sub-section (1) and (2) of section 36 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993), the Central Government hereby makes the following rules, namely:-

Short title and commencement

(1) These rules may be called THE DEBTS RECOVERY APPELLATE TRIBUNAL (PROCEDURE) RULES,1994.

(2) They shall come into force on the date of their publication in the Official Gazette.

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Definitions – In these rules, unless the context otherwise requires, -

(a) “Act” means the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (51 of 1993);

(b) “agent” means a person duly authorised by a party to present appeal or to give reply on its behalf before the Appellate Tribunal;

(d) “appellant” means a person or a bank or a financial institution making an appeal to the Appellate Tribunal under section 20 or section 30 of the Act;

(e) “Appellate Tribunal” means an Appellate Tribunal established by Central Government under section 8 of the Act;

(f) “legal practitioner” shall have the same meaning as assigned to it in the Advocates Act, 1961(25 of 1961)

(g) “Presiding Officer” means the Presiding Officer of an Appellate Tribunal;

(h) “Registrar” means the Registrar of an Appellate Tribunal and includes an officer of such Appellate Tribunal who is authorised by the Presiding Officer to function as Registrar;

(i) “Registry” means the Registry of the Appellate Tribunal.

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Sittings of Appellate Tribunal. – An Appellate Tribunal shall hold its sittings either at Headquarters or at such other place falling within its jurisdiction as it may consider convenient.

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Language of Appellate Tribunal

(1)The proceedings of the Appellate Tribunal shall be conducted in English or Hindi.

(2) No appeal, reference, application, representation, document or other matters continued in any language other than English or Hindi, shall be accepted by the Appellate Tribunal, unless the same is accompanied by a true copy of translation thereof in English or Hindi.

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Procedure for filing appeals

(1) A memorandum of appeal shall be presented in the Form annexed to these rules by the Appellant either in person to the Registrar of the Appellate Tribunal within whose jurisdiction his case falls or shall be sent by registered post addressed to such Registrar.

(2) Where the appellant is a bank or a financial institution, a memorandum of appeal may be preferred, -

(a) by one or more legal practitioners authorised by such bank or financial institution or,

(b) by any of the officers of such bank or financial institution to act as Presenting Officers;

and every person so authorised may present the appeal before the Appellate Tribunal.

(3) Where the appellant is other than a bank or a financial institution, he may prefer an appeal in person or by his agent or by a duly authorised legal practitioner.

(4) An appeal sent by post under sub-rule (1) shall be deemed to have been presented to the Registrar on the day on which it is received in the office of the Registrar.

(5) The appeal under sub-rule (1) shall be presented in four sets in a paper book along with an empty file size envelope bearing full address of the respondent and where the number of respondents are more than one, then sufficient number of extra paper books together with empty file size envelopes bearing full addresses of each respondent shall be furnished by the appellant.

Application Format

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Presentation and scrutiny of memorandum of appeal

(1) The Registrar shall endorse on every appeal the date on which it is presented under rule 5 or deemed to have been presented under that rule and shall sign endorsement.

(2) If, on scrutiny, the appeal is found to be in order, it shall be duly registered and given a serial number.

(3) If an appeal on scrutiny is found to be defective and the defect noticed is formal in nature, the Registrar may allow the appellant to rectify the same in his presence and if the said defect is not formal in nature, the Registrar, may allow the appellant such time to rectify the defect as he may deem fit.

(4) If the concerned appellant fails to rectify the defect within the time allowed in sub-rule (3), the Registrar may by order and for reasons to be recorded in writing, decline to register such memorandum of appeal.

(5) An appeal against the order of the Registrar under sub-rule (4) shall be made within fifteen days of making of such order to the Presiding Officer concerned in his chamber, whose decision thereon shall be final.

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Place of filing memorandum of appeal. – The memorandum of appeal shall be filed by the appellant with the Registrar of the Appellate Tribunal having jurisdiction in the matter.

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Fee

(1) Every memorandum of appeal under section 20 of the Act shall be accompanied with a fee provided in sub-rule (2) and such fee may be remitted either in the form of crossed demand draft drawn on a nationalised bank in favour of the Registrar and payable at the station where the Registrar’s office is situated or remitted through a crossed Indian Postal Order drawn in favour of the Registrar and payable in Central Post Office of the station where the Appellate Tribunal is located.

(2) The amount of fee payable in respect of appeal under section 20 shall be as follows:-

Amount of debt due	Amount of fees payable
Less than rupees 10 lakhs	Rupees 12,000
Rupees 10 lakhs or more but Less than rupees 30 lakhs	Rupees 20,000
Rupees 30 lakhs or more	Rupees 30,000

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Deposit of amount of debt due. –Where an appeal is preferred by a person referred to in section 21 of the Act, such appeal shall not be entertained by the Appellate Tribunal unless such person has deposited with the Appellate Tribunal seventy-five per cent of the amount of debt so due from him as determined by the Tribunal under section 19 of the Act, provided that the Appellate Tribunal may, for reasons to be recorded in writing, waive or reduce the amount to be deposited under section 21 of the Act.

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Contents of memorandum of appeal

(1)Every memorandum of appeal filed under Rule 5 shall set forth concisely under distinct heads, the grounds of such appeal without any argument or narrative, and such grounds shall be numbered consecutively and shall be typed in double line space on one side of the paper.

(2) It shall not be necessary to present separate memorandum of appeal to seek interim order or direction if in the memorandum of appeal, the same is prayed for.

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Documents to accompany memorandum of appeal

Every memorandum of appeal shall be in triplicate and shall be accompanied with two copies (at least one of which shall be certified copy) of the order of the Presiding Officer of Debts Recovery Tribunal or order made by the Recovery Officer under section 30 of the Act, as the case may be, against which the appeal is filed.

(2) Where the parties to the appeal are being represented by an agent, documents authorising him to act as such agent shall also be appended to the appeal. Provided that where an appeal is filed by a legal practitioner, it shall be accompanied by a duly executed Vakalatnama.

(3) Where a bank or financial institution is being represented by any of its Officers to act as Presenting Officer before the Appellate Tribunal, the document authorising him to act as Presenting Officer shall be appended to the memorandum of appeal.

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Plural remedies – A memorandum of appeal shall not seek relief or reliefs based on more than a single cause of action in one single memorandum of appeal unless the reliefs prayed for are consequential to one another.

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Endorsing copy of appeal to the respondents – A copy of the memorandum of appeal and paper book shall be served on each of the respondents, as soon as they are filed, by the Registrar by registered post.

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Filing of reply to the appeal and other documents by the respondent

(1) The respondent may file four complete sets containing the reply to the appeal alongwith documents in a paper book form with the registry within one month of the service of the notice on him of the filing of the memorandum of appeal.

(2) The respondent shall also endorse one copy of the reply to the appeal alongwith documents as mentioned in sub-rule(1) to the appellant.

(3) The Appellate Tribunal may, in its discretion on application by the respondent, allow the filing of reply referred to in sub-rule (1), after the expiry of the period referred to therein.

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Who may be joined as respondents

(1) In an appeal by a person other than bank or financial institution, the bank or financial institution who has to recover any debt from any person under section 19 of the Act, before the Tribunal against whose order the appeal has been preferred, shall be made the respondent to the appeal.

(2) In an appeal by the bank or a financial institution the other party shall be made the respondent to the appeal.

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Date and place of hearing to be notified. – The Appellate Tribunal shall notify the parties the date and place of hearing of the appeal in such a manner as the Presiding Officer may by general or special order direct.

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Dress Regulations for the Presiding Officer and for the Representative of the Parties

(1) Summer dress for the Presiding Officer shall be white pant with black coat and a black tie or a buttoned-up black coat. In winter, striped or black trousers may be worn in place of white trousers. In the case of female Presiding Officers, however, the dress shall be black coat over white saree.

(2) The dress for the agent of the parties (other than a relative or regular employee of the appellant or respondent) appearing before the Appellate Tribunal shall be the following, namely:-

(a) In the case of a male, a suit with a tie or buttoned-up coat over a pant or national dress, that is, a long buttoned-up coat on dhoti or churidar pyjama. The colour of the coat shall, preferably, be black.

(b) In the case of female, black coat over white or any other sober coloured saree.

(c) Where, however, the agent belongs to a profession like that of lawyers or a chartered accountants and they have been prescribed a dress for appearing in their professional capacity before any Court, Appellate Tribunal, tribunal or other such authority, they may, at their option, appear in that dress, in lieu of the dress mentioned above.

(3) All other persons appearing before the Appellate Tribunal shall be properly dressed.

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Order to be signed and dated

(1) Every order of the Appellate Tribunal shall be in writing and shall be signed and dated by the Presiding Officer of the Appellate Tribunal.

(2) The order shall be pronounced in open Court.

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Publication of orders. – The orders of the Appellate Tribunal as are deemed fit for publication in any authoritative report or the press may be released for such publication on such terms and conditions as the Appellate Tribunal may lay down.

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Communication of orders.- Every order passed on an appeal shall be communicated to the appellant and to the respondent and to the Tribunal concerned either in person or by registered post free of cost.

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Fee for inspection of records and obtaining copies thereof

(1) A fee of rupees twenty for every hour or part thereof of inspection subject to a minimum of rupees one hundred shall be charged for inspecting the records of a pending appeal by a party thereto.

(2) A fee of rupees five for a folio or part thereof not involving typing and a fee of rupees ten for a folio or part thereof involving typing of statement and figures shall be charged.

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Orders and directions in certain cases. –The Appellate Tribunal may make such orders or give such directions as may be necessary or expedient to give effect to its orders or to prevent abuse of its process or to secure the ends of justice.

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Working hours of the Appellate Tribunal

(1) Except on Saturdays, Sundays and other public holidays, the offices of the Appellate Tribunal shall, subject to any other order made by the Presiding Officer, re_self open daily from 10 a.m to 6.00 p.m. but no work, unless of an urgent nature, shall be admitted after 4.30 p.m. on any working day.

(2) The sitting hours of the Appellate Tribunal shall ordinarily be from 10.30 a.m. to 1.00 p.m. and 2.00 p.m. to 5.00p.m. subject to any order made by the Presiding Officer.

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Holiday. – Where the last day for doing any act falls on a day on which the office of the Appellate Tribunal is closed and by reason thereof the act cannot be done on that day, it may be done on the next day on which that office opens.

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Powers and functions of the Registrar

(1) The Registrar shall have the custody of the records of the Appellate Tribunal and shall exercise such other functions as are assigned to him under these rules or by the Presiding Officer by a separate order in writing.

(2) The official seal shall be kept in the custody of the Registrar.

(3) Subject to any general or special direction by the Presiding Officer, the seal of the Appellate Tribunal shall not be affixed to any order, summons or other process, save under the authority in writing from the Registrar.

(4) The seal of the Appellate Tribunal shall not be affixed to any certified copy issued by the Tribunal save under the authority in writing of the Registrar.

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Additional powers and duties of Registrar. – In addition to the powers conferred elsewhere in these rules, the Registrar shall have the following powers and duties subject to any general or special orders of the Presiding Officer, namely:-

(1) To receive all appeals and other documents;

(2) To decide all questions arising out of the scrutiny of the appeals before they are registered;

(3) To require any appeal presented to the Appellate Tribunal to be amended in accordance with the rules;

(4) Subject to the directions of the Presiding Officer to fix date of hearing of the appeals or other proceedings and issue notices thereof;

(5) Direct any formal amendment of records;

(6) To order grant of copies of documents to parties to proceedings;

(7) To grant leave to inspect the record of Appellate Tribunal.

(8) Dispose of all matters relating to the service of notices or other processes, application for the issue of fresh notice or for extending the time for or ordering a particular method of service on a respondent including a substituted service by publication of the notice by way of advertisements in the newspapers;

(9) To requisition records from the custody of any Court or other authority.

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Seal and emblem. –The Official seal and emblem of the Appellate Tribunal shall be such as the Central Government may specify.

Legal issues related to Banking - Sreedhar Valiveti

Monday, July 21, 2014

HIGHLIGHTS OF BANKING CASES JOURNAL JULY 2014

United Bank of India vs. Satyawati Tondon & Ors. 2010 (8) SCC 110: 2010 (9) SCR 1

SC allowed lenders to publish names & photographs of wilful defaulters - SBI vs. DJ Exim

Saturday, May 31, 2014

THE DEBTS RECOVERY APPELLATE TRIBUNAL (PROCEDURE) RULES,1994

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