SARFAESI Actions In Good Faith Cannot Be Challenged In Civil Courts; DRT Remedy Must Be Pursued: Supreme Court

The Supreme Court has recently held that a challenge to action taken under the SARFAESI Act can be pursued only through the remedies provided by the Act, while civil courts cannot entertain matters that the Debt Recovery Tribunal (DRT) or Debt Recovery Appellate Tribunal (DRAT) is empowered to determine.A bench of Justice B.V. Nagarathna and Justice Augustine George Masih set aside the Madhya Pradesh High Court's May 8, 2024 review order, which had given Jayant Vitamins Ltd liberty to pursue a...

Cheque Bounce Notice Sent To Correct Address Valid Even If Received By Drawer's Mother: Supreme Court

The Supreme Court on Wednesday held that a statutory demand notice sent by registered post to the correct address of a cheque drawer satisfies the requirement under Section 138 of the Negotiable Instruments Act, 1881, even if the notice is received by the drawer's mother. "This Court is of the considered view that once the notice was dispatched to the correct address of respondent No.2, the statutory requirement of 'giving of notice' under proviso (b) to Section 138 of the Act, 1881 stood...

Supreme Court Refuses To Interfere With HC Order Dismissing Contempt Plea Against Kotak Bank In SARFAESI Case

The Supreme Court on Monday refused to interfere with a Bombay High Court order dismissing a contempt petition alleging that Kotak Mahindra Bank had violated the High Court's direction to give at least seven days' notice before taking physical possession of a flat under the SARFAESI Act.A Bench of Justices B.V. Nagarathna and R. Mahadevan noted that the High Court had already provided sufficient safeguards to enable the petitioner to remove her belongings from the flat. It therefore found...

RBI Recovery Guidelines 'Exist Only On Paper': Supreme Court Directs Effective Compliance By Banks, NBFCs

The Supreme court on Wednesday directed the Reserve Bank of India (RBI) to take effective steps to ensure that NBFCs and Scheduled Commercial Banks actually comply with its recovery guidelines, observing that the Guidelines, Master Circulars and Clarifications issued over the years have “existed only on paper”. The direction came while allowing an appeal by Hari Dutta Sharma, whose commercial vehicle was repossessed by Cholamandalam Investment and Finance Company Limited after loan defaults. ...

Supreme Court Dismisses Plea Claiming ARCs Are Not Banking Companies And Cannot Use SARFAESI, RDB Acts

The Supreme Court has recently dismissed a petition by a borrower challenging an Asset Reconstruction Company's (ARC) use of the SARFAESI Act to recover dues. The borrower argued that ARCs are not “banking companies” and therefore cannot invoke the recovery law.The court, however, did not examine that broader question.Instead, the court rejected the petitioner's separate contention that SARFAESI could not be invoked after the Debt Recovery Tribunal (DRT), Ernakulam, had passed a decree. A...

Banks Can Use SARFAESI To Recover Dues Under Loans Acquired From Non-Notified Institutions: Supreme Court

The Supreme Court has ruled that a bank can use the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, commonly known as the SARFAESI Act, to recover a secured loan it acquired from an entity not covered by the law. This applies even if the original lender was not covered by the Act when the loan was granted.Justices Sanjay Kumar and Sanjeev Sachdeva ruled,“When the institution is one to which the SARFAESI Act is already applicable, acquisition...

Failure To Serve CPC Notice On Legal Representatives Does Not Invalidate DRT Auction Sale: Supreme Court

The Supreme Court on Friday upheld an auction sale of a Delhi property in debt recovery proceedings. It held that the CPC notice requiring the legal representatives of a deceased judgment debtor to show cause why the decree should be executed against them did not govern the auction after the proceedings were transferred to the DRT.A bench of Justices Pamidighantam Sri Narasimha and Alok Aradhe noted that the execution proceedings were initially before the Morena court, where the issue of notice...

Mere Denial Can't Rebut Cheque Bounce Presumption, Accused Must Produce Probable Evidence: Supreme Court

The Supreme Court on Tuesday ruled that simply denying liability is not enough to rebut the statutory presumptions available to a complainant in a cheque bounce case. Once the execution of a cheque or the signature on it is admitted, the burden shifts to the accused, who must place probable material on record to show that no legally enforceable debt or liability existed.A Division Bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan observed,"A bare denial of the passing of any...

Delay Condonation Under NI Act Cannot Be Used To Cure Fatal Defects: Supreme Court

The Supreme Court has ruled that the power to condone delay in taking cognizance of a complaint under the Negotiable Instruments Act cannot be used to cure a complaint suffering from a fatal defect. The court observed that such power cannot be invoked to circumvent the Act by allowing fatal defects to be rectified during the proceedings when the complaint itself deserved dismissal at the threshold.A Division Bench of Justices Manoj Misra and Vijay Bishnoi observed,"No doubt, the Court empowered...

Mere Denial Cannot Rebut Presumption Of Legally Enforceable Debt In Cheque Dishonour Cases: Supreme Court

The Supreme Court has recently ruled that an accused cannot rebut the statutory presumption arising from a dishonoured cheque by merely denying liability. Dismissing an appeal against a Karnataka High Court order remanding a cheque dishonour case for fresh consideration, the court observed that an accused must explain the circumstances in which the cheque was issued and how it came into the complainant's possession. It also noted that proving the complainant lacked the financial capacity to...

Lending Public Money Without Efforts To Recover It Is 'Not Acceptable'; SC Issues Notice On Plea Seeking Probe Into JKM Infra

Calling it a "deep-rooted nexus" between banks, Asset Reconstruction Companies (ARCs), and borrowers, the Supreme Court on Friday said it was "not acceptable" for public money to be lent and then not effectively recovered. The remarks came as the Court issued notice on a PIL seeking a court-monitored probe into the settlement of JKM Infra Projects Ltd's ₹1,537 crore debt for ₹73.50 crore through the ARC route. A vacation bench of Chief Justice Surya Kant and Justice V. Mohana heard the matter...

SC Refuses To Interfere With HC Orders Involving Law Firm In Chennai Metro Compensation Contempt Case

Observing that the case involved allegations of a "complete fraud played upon the judicial system," the Supreme Court on Tuesday declined to interfere with Madras High Court orders that brought law firm The Legal Attorneys and Barristers into contempt proceedings stemming from allegations that Samarpana Charitable Trust secured ₹13.18 crore in Chennai Metro Land acqusition compensation after concealing an existing mortgage and ongoing recovery proceedings from the Court.A bench comprising Chief...