Security Interest (Enforcement) Rules, 2002, Rule 9(4)(5) – Auction sale by bank – Sale certificate -- Non-deposit of auction amount within 15 days – Extension of time -- Respondents/ auction purchaser sought extension of time for the reason that the appellant-Bank itself was not in a position to accept the amount as there was a complaint to the CBI, an advisory of the ED and a stay from the High Court -- Silence on part of the appellant-Bank in either immediately revoking the sale confirmation or refusing to extend the time, impliedly amounted to extension of time in writing with consent.

-- Respondents were always ready and willing to deposit the balance auction amount of Rs.1,06,50,000/- and had rather submitted a bank draft dated 15.10.2022 of the said amount and had requested for the issuance of the sale certificate and possession of the auction property – It establishes the bona fide of the respondents and it was only the appellant-Bank who had avoided the issuance of the sale certificate.

-- Non-issuance of the sale certificate is solely attributable to the appellant-Bank and that there were no latches, negligence or default on part of the respondents in offering to deposit the balance auction amount.

Non-deposit of the said amount within the stipulated period would not be fatal within the meaning of sub-Rules (4) and (5) of Rule 9 of the Rules.

(Para 16-19)

National Housing Bank Act, 1987 (53 of 1987), Section 29A -- Code of Criminal Procedure, 1973 (2 of 1974), Section 200 -- Cognizance in complaint -- Vicarious liability of Directors of Company – Role of -- In the absence of the averments as contemplated by sub-section (1) of Section 50 in the complaint, the Trial Court could not have taken cognizance of the offence against the third to seventh accused, who are allegedly the directors of the first accused company -- Complaint stand quashed against the third to seventh accused.

(Para 8, 9)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 2 (zd), 13, 35 -- Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), Section 9 -- Banking Regulation Act, 1949 (10 of 1949), Section 21, 35A – Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSME) Sector] Directions, 2016, Direction 4, 4.8 – Secured creditors -- SARFAESI proceedings -- MSME – Rehabilitation of – Non-Performing Assets – Procedure of -- Revival and Rehabilitation of MSMEs -- Section 21 and Section 35A of Banking Regulation Act empower the RBI to frame the policy and give directions to the banking companies in relation to the advances to be followed by the banking companies -- Such directions have got to be read as supplement to the provisions of the Banking Regulation Act and accordingly are required to be construed as having statutory force and mandatory.

-- Entire exercise as contained in the “Framework for Revival and Rehabilitation of MSMEs” is required to be carried out by the banking companies before the accounts of MSMEs turn into Non-Performing Asset.

-- Whole process of enforcement of security interest as contained in Chapter III of the SARFAESI Act, could be initiated only when the borrower makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, in view of Section 13(2) of the said Act.

-- Banking companies though may be ‘Secured creditors’ as per the definition contained in Section 2 (zd) of the SARFAESI Act, are bound to follow the same,  before classifying the loan account of MSME as NPA.

The Instructions/ Directions issued by the Central Government under Section 9 of the MSMED Act and by the RBI under Section 21 and Section 35A have statutory force and are binding to all the Banking companies.

(Para 12-18)

A. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 13(2)(4) – Constitution of India, Article 226 -- SARFAESI proceedings – Writ jurisdiction – Interference under Article 226 of the Constitution of India has to be minimal and it is only in exceptional or extraordinary circumstances that intervention should be there.

(Para 5)

B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 13(2)(4) – Constitution of India, Article 226 -- SARFAESI proceedings – One time Settlement/ OTS -- Writ jurisdiction – A Borrower/ guarantor does not have a vested right to seek OTS -- There can be no positive direction to the Bank/ financial institutions for sanctioning OTS.

(Para 6)

Constitution of India, Article 226 -- Transfer of Property Act, 1882 (4 of 1882), Section 100 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 13 -- Himachal Pradesh Electricity Regulatory Commission (Distribution Performance Standards) Regulations, 2010 -- Electricity dues of previous owner -- Auction purchaser under SARFAESI -- Recovery from auction purchaser/ transferee – Permissibility of – Electricity Bill due are attributable to the consumer – No Charge u/s 100 of TP Act created -- Order demanding dues of previous owner from auction purchaser quashed.

(Para 3, 8, 9)

A. HUF as proprietor -- Proprietorship is not governed by any statute, there is no bar on a Hindu Undivided Family becoming a proprietor.

(Para 15)

B. HUF -- One person cannot form a Hindu Undivided Family.

(Para 15)

C. Legal Services Authorities Act, 1987 (39 of 1987), Section 22C -- Loan to Proprietorship/ HUF – Exemption from payment of foreclosure charges to individual – Applicability of -- Application for loan signed with stamp “Proprietor/HUF” -- In the PAN details of applicant/borrower, details of the sole proprietor alone have been mentioned -- Application for loan was submitted for and on behalf of the Individual borrowers/ sole proprietorship and not in any capacity as a Hindu Undivided Family -- Merely because the wife and son become “Co-applicants”, it would not automatically term the borrowing as one by Hindu Undivided Family, which is a separate entity for assessment and the Hindu Undivided Family never submitted an application -- Meaning of “/” has to be read as “either/or”, hence, the interpretation of the stamp has to be in the context in which the application had been submitted -- Foreclosure charges along with the processing charges charged by the respondent/ Finance Company directed to be refunded to the petitioner with interest @ 6% per annum.

(Para 15-24)

D. Legal Services Authorities Act, 1987 (39 of 1987), Section 22C -- Permanent Lok Adalat -- Public Utility Services -- Authorised representative – Permissibility of -- There is no mandate in law that only the sole proprietor could have preferred an application before the Permanent Lok Adalat (Public Utility Services) and that he could not have authorised any other representative to pursue the application u/s 22-C of the Legal Services Authorities Act, 1987 -- No adverse inference can be drawn only on the strength that the proprietor has come before High Court whereas the application had been preferred before the Permanent Lok Adalat (Public Utility Services) through the authorised representative.

(Para 22)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 17, 34 -- Code of Civil Procedure, 1908 (V of 1908), Order 7 Rule 11, Order 39 Rule 1 & 2 -- SARFAESI  proceedings – Rejection of plaint – Jurisdiction of civil court -- Temporary injunction -- An injunction can be granted only after applying three well known tests:- i. Prima facie case; ii. Balance of convenience in favour of the plaintiffs; and iii. Irreparable loss and injury, which the party is likely to suffer -- Without applying these three tests, the Courts are not expected to grant injunction, particularly against financial creditors, who are already facing lot of difficulties in recovery of the defaulted amount -- Plaint rejected while relegating the plaintiffs to the remedy u/s 17 of the 2002 Act before Debt Recovery Tribunal.

(Para 13)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002), Section 13(2)(4), 14, 26D, 26E -- Secured Debt – Red entry/ Lien by Excise and Income Tax department – Right of – SARFAESI proceedings initiated – Petitioner-Bank is not only a secured creditor but has created the first charge over the property in question as far as back in the year, 2013 – Excise and Taxation Department got entered a report dated 09.07.2015 and Income Tax Department got entered report dated 05.02.2018 in revenue record -- Held, once the petitioner is a secured creditor and has moreover created the first charge over the property, then obviously, it has the first right to realise its dues – Writ petition allowed, respondents directed to remove the red entry qua the property in question.

(Para 5, 6, 11-13)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 14 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 482 – SARFAESI proceedings – Jurisdiction of High Court u/s 482 Cr.P.C -- High Court quashed the order passed u/s 14 of the SARFAESI ACT u/s 482 Cr.P.C – Held, remedy against such order can be availed only under the SARFAESI ACT – Impugned order passed by the High Court set aside.

(Para 3-5)

A. Interpretation of statute -- If the legislature confers the later enactment with a non-obstante clause, it means the legislature wanted the subsequent / later enactment to prevail.

(Para 7)

B. Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), Section 15, 16, 17, 18, 19, 20, 21, 22, 23, 24 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 26E – MSMED proceedings -- SARFAESI proceedings -- ‘priority’ conferred / provided under Section 26E of the SARFAESI Act would prevail -- Recoveries under the SARFAESI Act with respect to the secured assets would prevail over the recoveries under the MSMED Act to recover the amount under the award / decree passed by the Facilitation Council.

(Para 6-11)

C. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(4), 14, 17 -- Adjudication of dispute between Secured creditor and debtor – Jurisdiction of District magistrate/ Chief Metropolitan Magistrate -- Under Section 14 of the SARFAESI Act, the District Magistrate or the Chief Metropolitan Magistrate as the case may be is required to assist the secured creditor in getting the possession of the secured assets -- Under Section 14 of the SARFAESI Act, neither District Magistrate nor Metropolitan Magistrate would have any jurisdiction to adjudicate and/or decide the dispute even between the secured creditor and the debtor -- If any person is aggrieved by the steps under Section 13(4) / order passed under Section 14, then the aggrieved person has to approach the Debts Recovery Tribunal by way of appeal / application under Section 17 of the SARFAESI Act.

(Para 10)

A. Constitution of India, Article 226, 227 -- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4), 17, 18 -- SARFAESI proceedings – Challenge to order of DRT – Alternative remedy of appeal -- Writ jurisdiction -- By entertaining the writ petition straightway under Article 226/227 of the Constitution of India challenging the order passed by the DRT-I, the High Court has allowed / permitted the borrower to circumvent the provision of appeal before the DRAT under the provisions of the SARFAESI Act – In view of alternative statutory remedy available by way of appeal before the DRAT, the High Court ought not to have entertained the writ petition.

(Para 6)

B. Constitution of India, Article 226, 227 -- Security Interest (Enforcement) Rules, 2002, Rule 8(1)(2) – Possession of secured assets -- Possession Notices were published in two leading newspapers having sufficient circulation in the locality -- Even the Possession Notices were served upon the borrowers also -- Therefore, the High Court has materially erred in holding that there was a breach of Rules 8(1) & (2) of the Rules, 2002 -- Impugned judgment and order passed by the High Court quashed and set aside.

(Para 6.2, 8)

C. Constitution of India, Article 226, 227 -- Security Interest (Enforcement) Rules, 2002, Rule 9(3)(4) -- Auction of secured assets -- Deposit of 25 % of auction price on next day – Deposit of 75% amount on 15^th day from communication by Bank – Permissibility of – High Court observed and held that there was non-compliance of the Rule 9(3) inter alia on the ground that 25% of the amount of sale price and thereafter 75% of the balance sale price was not deposited within the time stipulated under Rule 9 – Held, findings are just contrary to Rules 9(3) and (4) of the Rules, 2002.

-- Purchaser was required to deposit 25% of the amount of the sale price on the same day of sale or not later than the next working day -- Auction was held on 17.02.2017 -- Entire 25% of the sale price came to be deposited by 18.02.2017.

-- By communication / letter dated 08.03.2017, the secured creditor/ Bank directed the auction purchaser to deposit the balance 75% of the bid amount within 15 days and the auction purchaser deposited the balance 75% of the sale price on 23.03.2017, i.e., on the 15th day from the date of communication by the secured creditor/ Bank -- As per Rule 9(4) of the Rules, 2002, the balance amount of purchase price payable shall be paid by the purchaser to the Authorized Officer on or before 15th day of confirmation of sale of the immovable property or such extended period, in any case not exceeding three months -- Therefore, the communication dated 08.03.2017 can be said to be the extended period by the secured creditor/ Bank.

Held, it can be said that the entire sale price was deposited within the time prescribed under Rules 9(3) and (4) of the Rules, 2002 -- Therefore, the High Court has committed an error in holding that there was a breach of Rules 9(3) & (4) of the Rules, 2002 -- Impugned judgment and order passed by the High Court quashed and set aside.

(Para 2.3, 6.3, 6.4, 8)

D. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4), 31(i) -- Agricultural property – Exemption from the provisions of the SARFAESI Act -- Once the secured property is put as a security by way of mortgage etc. meaning thereby the same was not treated as agricultural land, such properties cannot be said to be exempted from the provisions of the SARFAESI Act under Section 31(i) -- No evidence was led at all on behalf of the borrowers that the secured properties in question were actually put to use as agricultural land and/or any agricultural activity was going on -- High Court has committed an error in applying Section 31(i) of the SARFAESI Act and quashing and setting aside the entire Possession Notice, Auction Notice as well as Sale etc. -- Impugned judgment and order passed by the High Court quashed and set aside.

(Para 7.2, 8)

E. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4), 31(i) -- Agricultural property – Exemption from the provisions of the SARFAESI Act – Onus of proof -- When it was the case on behalf of the borrowers that in view of Section 31(i) of the SARFAESI Act, the properties were agricultural lands, the same were being exempted from the provisions of the SARFAESI Act, the burden was upon the borrower to prove that the secured properties were agricultural lands and actually being used as agricultural lands and/or agricultural activities were going on.

(Para 7.3)

A. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 2(g), 13, 17, 18, Second Proviso -- Appeal – Pre-deposit of 50% of debt due amount – Meaning of Debt due -- Whatever amount is mentioned in the notice u/s 13(2) of the SARFAESI Act, in case steps taken u/s 13(2)/13(4) against the secured assets are under challenge before the DRT will be the ‘debt due’ within the meaning of proviso to Section 18 of the SARFAESI Act -- In case of challenge to the sale of the secured assets, the amount mentioned in the sale certificate will have to be considered while determining the amount of pre-deposit u/s 18 of the SARFAESI Act -- However, in a case where both are under challenge, namely, steps taken u/s 13(4) against the secured assets and also the auction sale of the secured assets, in that case, the “debt due” shall mean any liability (inclusive of interest) which is claimed as due from any person, whichever is higher.

(Para 13)

B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 2(g), 13, 17, 18, Second Proviso -- Appeal – Pre-deposit of 50% of debt due amount – Adjustment of amount of auction sale -- It is the “borrower” who has to deposit the 50% of the amount of “debt due” from him --  If the borrower wants to appropriate and/or adjust the amount realised from sale of the secured assets deposited by the auction purchaser, the borrower has to accept the auction sale -- Borrower can take the benefit of the amount received by the creditor in an auction sale only if he unequivocally accepts the sale -- In a case where the borrower also challenges the auction sale and does not accept the same and also challenges the steps taken under Section 13(2)/13(4) of the SARFAESI Act with respect to secured assets, the borrower has to deposit 50% of the amount claimed by the secured creditor along with interest as per section 2(g) of the Act 1993 and as per section 2(g), “debt” means any liability inclusive of interest which is claimed as due from any person.

(Para 14)

C. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 2(g), 13, 17, 18, Second Proviso -- Appeal – Pre-deposit of 50% of debt due amount – Adjustment of amount of auction sale -- Borrower has to deposit 50% of the amount of “debt due” as claimed by the bank/financial institution/assignee along with interest as claimed in the notice under Section 13(2) of the SARFAESI Act and the borrower is not entitled to claim adjustment/appropriation of the amount realised by selling the secured properties and deposited by the auction purchaser when the auction sale is also under challenge.

(Para 17)

Constitution of India, Article 21 – Bank loan Defaulter -- Right to travel abroad – Look Out Notice (LOC) – Fundamental right to travel abroad guaranteed by Article 21 of the Constitution of India cannot be curtailed by seeking issuance of an LOC – Since the right to travel abroad flows from Article 21 of the Constitution of India, a very high threshold is mandated to deny such a right to an Indian citizen -- At the time the LOC was issued against the petitioner, he is not an accused of having committed a cognizable offence in India -- Originating agency can only request that they be informed about the arrival/departure of the subject in such cases -- Since in the instant case, petitioner is admittedly having ‘permanent residency certificate’ of USA and has business interests in the USA, the petitioner cannot be prevented from travelling abroad -- However in view of declaration of loan account as fraud and declaration of petitioner as a “willful defaulter” and filing of a police complaint, though after filing of the Writ Petition, subject to certain conditions, he can be permitted to travel abroad – Writ Petition allowed, subject to depositing an FDR/TDR for Rs. 10 lakhs with the Registrar General within 2 weeks, the LOC issued against the petitioner set aside -- In the event of petitioner returning to India and producing his passport before the Registrar (General) within the time of 2 months as aforesaid, the FDR/TDR deposited by him shall be returned otherwise it shall be forfeited.

(Para 34-51)

Constitution of India, Article 226 -- Indian Contract Act, 1872 (9 of 1872), Section 62 – Banking default case -- One Time Settlement/ OTS – Extension of time – Writ jurisdiction -- Borrower as a matter of right cannot claim extension of time – By the impugned judgment and order rescheduling the payment under the OTS Scheme and granting extension of time would tantamount to rewriting the contract which is not permissible while exercising the powers under Article 226 of the Constitution of India – Impugned judgment/ order quashed and set aside -- Consequently, the original writ petition filed by the respondent/borrower stands dismissed.

(Para 6-8)

A. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 14 – Power of District Magistrate -- Designating authority u/s 14 of SARFAESI Act – Powers exercisable by CMM/DM u/s 14 of the SARFAESI Act are ministerial step and Section 14 does not involve any adjudicatory process qua points raised by the borrowers against the secured creditor taking possession of the secured assets.

(Para 5)

B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 14, 17 – Power of District Magistrate -- Designating authority u/s 14 of SARFAESI Act – Third party rights – Consideration of -- Once all the requirements u/s 14 of the SARFAESI Act are complied with/satisfied by the secured creditor, it is the duty cast upon the CMM/DM to assist the secured creditor in obtaining the possession as well as the documents related to the secured assets even with the help of any officer subordinate to him and/or with the help of an advocate appointed as Advocate Commissioner -- At that stage, the CMM/DM is not required to adjudicate the dispute between the borrower and the secured creditor and/or between any other third party and the secured creditor with respect to the secured assets and the aggrieved party to be relegated to raise objections in the proceedings u/s 17 of the SARFAESI Act, before Debts Recovery Tribunal.

(Para 5)

C. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 14 – Power of District Magistrate -- Designating authority u/s 14 of SARFAESI Act – Keeping of application pending -- Power of -- Tenancy rights – Consideration of – No error committed by the High Court in setting aside the order passed by the designated authority keeping the application pending till the secured creditor initiates the legal proceedings for eviction of the tenant cannot get the possession in an application u/s 14 of the SARFAESI Act -- High Court rightly directed the designated authority to proceed further with the application u/s 14 of the SARFAESI Act, and to dispose of the same in accordance with the provisions of Section 14 of the SARFAESI Act.

(Para 5)

D. Interpretation of judgment -- A judgment cannot be interpreted and applied to fact situations by reading it as a statute -- One cannot pick up a word or sentence from a judgment to construe that it is the ratio decidendi on the relevant aspects of the case.

(Para 7)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2), 17 – Constitution of India, Article 226 -- Insurance claim wrongly transferred by Bank – Default due to wrong Act of Bank -- Plea of -- Challenge to Section 13(2) Notice of SARFAESI Act – Writ jurisdiction -- Alternative remedy – Limitation -- Held, mainly challenged before the High Court was notice u/s 13(2) of the SARFAESI Act, High Court ought not to have entertained the writ petition -- Remedy available to the respondents/ loanee was to initiate proceedings u/s 17 of the SARFAESI Act – Respondents relegated to avail the alternative statutory remedy by way of Section 17 of the SARFAESI Act – When such proceedings are initiated, the same be considered in accordance with law and on its own merits including the case on behalf of the original writ petitioners that nothing was due and payable, if the amount received as insurance claim would not have transferred to the Working Capital Account -- Appeal allowed to the aforesaid extent -- If such proceedings are initiated within a period of four weeks, the same be dealt with without raising the dispute with respect to limitation, however, subject to compliance of other requirements under the Act.

(Para 2-6)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 17(4A), 34 -- Code of Civil Procedure, 1908 (V of 1908), Order VII Rule 11 – SARFAAESI proceedings – Lessee rights -- Rejection of plaint – Jurisdiction of civil Court – Once there is a specific amendment enabling the persons claiming tenancy or lease hold rights to file a petition before the Debt Recovery Tribunal, the Civil Court has erred in rejecting the application -- Even the period of lease has already expired -- Civil Court directed to return the plaint to the plaintiff with liberty to file a petition before the Debt Recovery Tribunal.

(Para 1-4)

Haryana Municipal Act, 1973 (24 of 1973), Section 130 -- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 14 – Property tax defaulter -- Auction sale by Corporation – ‘Where is and what is there is basis’ -- Bank loan pending against property – Rights of auction purchaser – Clause also stated that on the property being knocked down in favour of the bidder in the auction, he shall be held to waive all objections to the title & description etc. of the property – Term of the auction would bind all bidders including the petitioner – Sale certificate  also contains a clause that in case any liability occurs against the respondent No.2, such as prior Bank loan, only the purchaser would be liable for the same -- Petitioner cannot now contend that suppression of the mortgage in favour of respondent No.2/ Bank by respondent No.1/ MC in the auction proceedings amounts to misrepresentation, and he is entitled to refund of the sale consideration as well registration and stamp duty paid by him for obtaining the sale certificate – Writ petition dismissed.

(Para 14-29)

Transfer of Property Act, 1882 (4 of 1882), Section 60 -- Bank loan recovery matter -- Auction sale of mortgaged property – Right of borrower to redeem mortgage -- Right of redemption would be available to the borrowers before issuance of sale certificate in favour of Auction Purchasers, and such a right would continue till execution of a conveyance i.e. issuance of a sale certificate in favour of the mortgagee -- Dues of the Bank have been fully cleared and the principal amount deposited by the auction purchaser has been refunded – Sale notice required to be set aside -- Bank shall restore to the petitioners the Title Deeds of the secured asset/s which are in its custody within two weeks and the restriction imposed on the petitioners not to alter the nature of the property or create any third party rights including taking loan against the property set aside -- Bank directed to pay interest @7% per annum to Auction Purchaser from the respective dates of deposit of the bid amount till when the principal amount was refunded to it.

(Para 19-31)

A. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 14 -- SARFAESI proceedings – Tenant’s right -- Application by tenant restraining Bank to take possession -- Rejected by Chief Metropolitan Magistrate – Appeal against -- Serious doubt as to the bona fide of the tenant -- Documents produced in support of his claim are xerox copies of the rent receipts which is after the date of creation of the mortgage -- Borrowers have not claimed that any tenant is staying at the Secured Asset -- At the time of grant of facility, third-party valuers had also confirmed that the Borrowers were staying at the Secured Asset – Tenancy is not supported by any registered instrument -- Appellant is a “tenant-in-sufferance”, therefore, he is not entitled to any protection of the Rent Act – No merit in appeal, dismissed.

(Para 14)

B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 14 -- SARFAESI proceedings – Tenant’s right -- If the tenancy has been claimed to be renewed in terms of Section 13(13) of the SARFAESI Act, the Borrower would be required to seek consent of the secured creditor for transfer of the Secured Asset by way of sale, lease or otherwise, after issuance of the notice under Section 13(2) of the SARFAESI Act.

(Para 14)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4) -- Code of Civil Procedure, 1908 (V of 1908), Order 7 Rule 11 – SARFAESI proceedings – Challenge in civil suit -- Rejection of plaint – Bank’s application under Order 7 Rule 11 CPC for rejection of the plaint was allowed by the Civil Judge (Junior Division) – Appeal against the said order was allowed by learned Additional District Judge – Where it cannot be disputed that an action under the Securitisation Act is based upon creation of an equitable mortgage jurisdiction of the Civil Court is barred – Revision allowed, and impugned order passed by the Additional District Judge set aside, order passed by the trial Court is restored.

(Para 1,10,11)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4) -- Contempt of Courts Act, 1971 (70 of 1971), Section 12, 19 – Constitution of India, Article 226 -- SARFAESI proceedings -- Contempt of Court -- Undertaking before the High Court to make payment on specific dates – Non-honouring of commitment – Held, series of acts committed by the petitioners (i) in issuing post-dated cheques, which were dated beyond the date within which they had agreed to make payment; (ii) in allowing those cheques to be dishonoured; (iii) in not appearing before the Court on the first date of hearing with an excuse that was found to be false; (iv) in coming up with an explanation about their own debtors committing default; and (v) in getting exposed through the report of the SFIO, convinced the High Court to believe that the undertaking given by the petitioners was not based upon good faith but intended to hoodwink the Court – No fault with the High Court holding the petitioners guilty of contempt -- No dispute on facts that the mortgaged properties have now been sold and with extraordinary efforts, the Bank has also taken possession -- Petitioners have also spent 11 days in custody out of the total period of imprisonment of three months imposed by the High Court -- In such circumstances, it is sufficient punishment for the petitioners – Sentence reduced to already undergone.

(Para 12-14, 27, 33, 34)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4), 14 -- Constitution of India, Article 226 -- SARFAESI proceedings – Writ jurisdiction -- Vide impugned order, the District Magistrate appointed a receiver to take possession of the secured assets of the petitioner-firm -- Petitioner-firm has failed to point out any illegality in the procedure adopted by the respondent-Bank and also the petitioner-firm not approached the Debt Recovery Tribunal for efficacious remedy -- When appropriate forum is provided under the SARFAESI Act, 2002, High Court stands injuncted from interfering with any matter arising out of the proceedings under the SARFAESI Act -- Finding no merit, present petition ordered to be dismissed.

(Para 2-10)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4) -- Code of Civil Procedure, 1908 (V of 1908), Order 7 Rule 11 – SARFAESI proceedings – Civil suit – Maintainability of -- Rejection of plaint -- After the Bank had initiated proceedings under the SARFAESI Act and issued a notice dated 09.08.2019 u/s 13(2) thereof, the petitioner filed the suit on 19.09.2019 wherein besides seeking declaration as to his share and challenging the Will, he has also sought injunction restraining the Bank from selling/auctioning the property -- The facts give a clear impression that the action has been taken by the petitioner with an intention to create a hurdle so that the Bank is not able to recover its dues – 'No Objection Certificate' has been given by him at the time the property was mortgaged with the Bank -- Section 34 of SARFAESI Act bars the jurisdiction of the civil court in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is required to determine by or under the Act -- Except for a vague assertion that the officials of the Bank are in league with respondent No.2, there is no pleading regarding fraud by the Bank -- Material averments in the plaint do not even remotely suggest as to how the action of the bank is fraudulent or absured or untenable -- Suit is barred u/s 34 of the SARFAESI Act – Order rejecting the plaint affirmed.

(Para 8-13)

A. Constitution of India, Article 226 -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Interim orders/directions/ protection – Extension of -- All the interim orders/directions issued or protection granted including any order requiring any compliance by the parties to such proceedings, passed by High Court or any other Court subordinate to it or any Family Court or Labour Court or any Tribunal or any other Judicial or Quasi-Judicial forum, over which High Court has power of superintendence, which are subsisting today shall stand extended till 30th June, 2021 -- If undue hardship and prejudice of any extreme nature, to any of the parties to such proceeding(s), such parties would be at liberty to seek appropriate relief by moving appropriate application(s) before the Competent Court(s), Tribunal, Judicial or Quasi-Judicial Forum.

(Para 2 (i), (xii))

B. Constitution of India, Article 226 -- Civil Suit – Extension of time for filing written statement -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Time for filing of written-statement or return in any Suit or proceeding pending before any Civil Court or any other forum, unless specifically directed, shall stand extended till 30th of June, 2021 -- It is however will not preclude the parties from filing such written-statement or return before 30th June, 2021.

(Para 2 (iii))

C. Constitution of India, Article 226 -- Execution of eviction, dispossession, demolition etc. -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Orders of eviction, dispossession, demolition, etc. passed by High Court or any Court subordinate to it or any Tribunal or Judicial or Quasi-Judicial forum, which have so far remained unexecuted, shall remain in abeyance till 30th of June 2021.

(Para 2 (iv))

D. Constitution of India, Article 226 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 438 -- Anticipatory bail – Interim protection -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Interim protection given in the anticipatory bail applications by the High Court or Court of Sessions for a limited period, which is likely to expire from now up to 30^th June, 2021, shall stand extended till 30th of June, 2021 -- However, any party aggrieved by the conduct of the accused on such interim protection, may move the Court over the matter for discontinuation of such interim protection, if any prejudice is caused to him/her, in which event, the Court concerned shall be entitled to take independent view of the matter.

(Para 2 (v))

E. Constitution of India, Article 226 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 439 – Interim bail -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – All the interim bails granted under Section 439, Cr.P.C. by the High Court or Courts of Sessions, limited by timeframe specifying an expiry date from now up to 30th June, 2021, shall stand extended till 30th June, 2021, subject to the accused not abusing such liberty or else it may be cancelled at the instance of the State or the complainant, on application with adequate proof of the abuse of the liberty so granted by the Court concerned.

(Para 2 (vi))

F. Constitution of India, Article 226 -- Haryana Good Conduct Prisoners (Temporary Release) Act, 1988 (28 of 1988), Section 3,6 -- Punjab Good Conduct Prisoners’ (Temporary Release) Act, 1962 (11 of 1962), Section 3 – Parole – Extension of -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Parole granted to a person by order passed by a Court exercising the criminal jurisdiction and limited by time-frame specifying an expiry date from now up to 30th June, 2021, shall stand extended till 30th of June, 2021, subject to the accused not abusing such liberty or else it may be cancelled at the instance of the State or the complainant, on application with adequate proof of the abuse of the liberty so granted by the Court concerned.

(Para 2 (vi), (vii))

G. Constitution of India, Article 226 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 41A -- Cognizable offence – Arrest in -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Unless there is necessity of arrest for maintenance of law and order or any other emergent case, in a cognizable offence prescribing sentence up to seven years imprisonment, the police shall desist from arresting the accused up to 30th of June, 2021, without complying with the provision of Section 41A, Cr.P.C. -- This however may not be understood as an interdict on the power of the police to arrest, but should only be considered a mere advisory in the face of the ongoing crisis following second wave of Coronavirus.

(Para 2(viii))

H. Constitution of India, Article 226 – Eviction/ Demolition by government/ Corporation/ Council/ Board/ Panchayat etc. – Stay of -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – State Governments, Union Territory, Chandigarh, or any of its Departments or any Municipal Corporation / Council / Board or any Gram Panchayat or any other local body or any other agency and instrumentality of the State shall not take any action for eviction and demolition in respect of any property, over which any citizen or person or party or any Body Corporate, has physical or symbolic possession as on today till 30th June, 2021.

(Para 2(ix))

I. Constitution of India, Article 226 – Auction sale by Bank/ Financial Institution -- Stay of -- Covid 19 pandemic situation -- Directions issued in suo motu PIL – Any Bank or Financial Institution shall not take action for auction in respect of any property of any citizen or person or party or any Body corporate till 30th June, 2021.

(Para 2(x))

J. Constitution of India, Article 226 – Covid 19 pandemic situation -- Directions issued to Government bodies in suo motu PIL – If the Government of Punjab, Haryana, Union Territory, Chandigarh, and/or any of its Departments and/or functionaries, Central Government and/or its departments or functionaries or any Public Sector Undertakings or any Public or Private Companies or any Firm or any individual or person is/are, by the order of this Court or any Court subordinate to it or the Tribunals, required to do a particular thing or carry out certain direction in a particular manner, in a time frame, which is going to expire at any time from now up to 30th June, 2021, the time for compliance of such order shall stand extended up to 30th June, 2021, unless specifically directed otherwise by the Court concerned.

(Para 2(xi))

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2)(4) – Constitution of India, Article 226 -- Possession notice – Challenge to -- After the deposit of Rs.20 lacs on conditional stay, the account of the petitioners was regularized on the direction of the court -- After regularization, the account again declared NPA on account of defaults – After the declaration of NPA afresh, fresh proceedings are to be initiated under the SARFAESI Act and the previous action, which is under challenge before Court, would need no adjudication -- A fresh cause of action would arise in favour of the petitioners after the initiation of fresh proceedings under the SARFAESI Act -- Petition rendered infructuous.

(Para 5)

A. Prevention of Money-Laundering Act, 2002 (15 of 2003), Section 17 – Money laundering case -- Freezing / Stop operation of bank accounts – Procedure of -- Material on record – Authorised officer/ Adjudication officer – Role of -- No material to show that Director or other Authorised Officer recorded his belief, on the basis of information in his possession, that appellant had committed acts relating to money laundering and there was need to seize record or property -- It only stated that the Officer was investigating the case and sought relevant documents, but in the tabular column it was abruptly stated that the accounts have to be ‘debit freezed/ stop operations’ -- Freezing or the continuation thereof is without due compliance of the legal requirement and, therefore, not sustainable.

-- Since freezing of accounts was without following the prescribed procedure, respondent banks are directed to defreeze the respective accounts and clear the cheques issued by the appellant towards statutory dues such as ITDS, PF, ESI, Professional Tax, Gratuity etc., subject to availability of funds in the accounts. If any further amount remains available in the accounts after payment of the statutory dues and with regard to the same any action is to be taken by the respondent No.4, it would be open to them to do so subject to compliance of the required legal procedure afresh.

(Para 11-16)

B. Prevention of Money-Laundering Act, 2002 (15 of 2003), Section 17 -- Code of Criminal Procedure, 1973 (2 of 1974), Section 102 – Money laundering case -- Freezing / Stop operation of bank account – Procedure u/s 17 of PLA not followed – Seizure u/s Section 102 Cr.P.C. would not be valid for the reasons :

Firstly, Since PMLA is a stand-alone enactment and it contains provision for seizure (including freezing), the procedure contemplated therein has to be followed.

Secondly, when power is available under a special enactment, power under general law cannot be resorted to.

Thirdly, scheme of Section 102 Cr.P.C. is different from the scheme under PMLA. Power under Section 102 CrPC is for the Police Officer to be exercised during course of investigation.

Lastly, if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner alone and in no other manner.

(Paras 11, 12, 15)

Constitution of India, Article 226, 227 – Banking default case -- One time settlement (OTS) – Delay in deposit – Extension of – Writ petition disposed of with permission to the petitioner to pay the balance amount with interest at the rate of 9%. Anu Bhalla’s case (P&H DB) (2020) Law Today Live Doc. Id. 15836 relied.

(Para 2, 3)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 34 -- Code of Civil Procedure, 1908 (V of 1908), Order 39 Rule 1 & 2 -- SARFAAESI proceedings – Suit for permanent injunction dismissed – Temporary injunction declined in First Appeal – Challenge to -- District Magistrate passed order u/s 14 of the Act of 2002 to enable taking over of the physical possession of the secured assets -- Issue of the maintainability of the suit instituted by the petitioner weighs heavily against him – No ground to interfere with the order of appellate Court -- Revision dismissed.

(Para 1, 5-8)

Constitution of India, Article 226 -- Sale notice by Bank – Challenged in writ petition -- One Time Settlement/ OTS offered – Petitioners are ready and willing to deposit the sum of Rs.2.50 crores within the stipulated period – Stated that sum of Rs.50 lakhs shall be deposited by 28.12.2020, before 11:00 A.M. and rest of the amount of Rs.2 crores by 31.03.2021 – Writ petition disposed of, in case amount of Rs.50 lakhs is deposited by the petitioners by 11:00 A.M. on 28.12.2020, auction of the property scheduled for 28.12.2020 be deferred -- Sale notice dated 27.11.2020 shall stand set aside -- On failure of the petitioners to deposit the said amount, respondent is at liberty to proceed with the auction.

(Para 4-6)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(2),(4) -- Constitution of India, Article 226 -- SARFAESI case – Proposal to clear dues to put case out of NPA -- Writ petition disposed of with liberty to the petitioner to move a representation/proposal within a period of one week and Bank shall consider/ pass an order on the same -- Till a decision is taken, the Bank shall not proceed in the matter further with regard to the proceedings initiated against the petitioner under the SARFAESI Act.

(Para 1, 2)

Constitution of India, Article 226 -- Auction purchaser – Non-deposit of money -- Forfeiture of earnest money –  Settlement of issue – Refund of GST on earnest money – Petitioner ready to deposit full amount with interest – Direction given that in case the petitioner deposit the entire amount along with applicable interest i.e. 9% and the GST (already deposited by the bank to the Government on or before 28.12.2020), the Bank will transfer the property in the name of the petitioner and shall issue sale certificate forthwith -- Bank is also directed to apply for refund of the GST from the Government which has been deposited by it and in case the same is refunded, transfer the same to the petitioner forthwith.

(Para 2, 5-7)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 14 – Power of District Magistrate – Directory in nature – It is held by High Court that Section 14 of the SARFAAESI Act, 2002 mandating the District Magistrate to deliver possession of a secured asset within 30 days, extendable to an aggregate of 60 days upon reasons recorded in writing, is a directory provision – Held, remedy u/s 14 of the Act is not rendered redundant if the District Magistrate is unable to handover the possession -- District Magistrate will still be enjoined upon, the duty to facilitate delivery of possession at the earliest – Order passed by the High Court, upheld -- Appeal dismissed.

(Para 1, 20-22)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 14 -- Winding-up of company – Symbolic possession taken over by Official Liquidator – Initiation of proceedings by Bank under SARFAESI Act – Possession of secured assets – Right of – Held, no requirement for the Magistrate exercising power u/s 14 SARFAESI Act to seek permission from the Company Judge before directing handing over of possession of a property. Pegasus Assets Reconstruction Private Limited’s case (2016) 4 SCC 47 relied.

(Para 6)

Constitution of India, Article 226 – Default in bank loan -- Liability of guarantor – Release of guarantor property – Consideration of -- Son of the petitioner is loanee of the Bank and the petitioner stood as one of the guarantors -- Petitioner gave his residential house as a collateral security -- Loanee committed default in making payment of the amount -- Petitioner made representation for release of his residential property from the respondent-Bank and to deposit the amount equivalent to market value of the property to the Bank, but still no action has been taken on his representation – Writ petition disposed of with a direction to the respondent- Bank to take action on the pending representation in accordance with law within a period of two weeks.

(Para 3-6)

A. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13 – Constitution of India, Article 226 -- Loan by a Company – Guarantors also took separate house loan – Clubbing of mortgage properties – Permissibility of -- Loan of Company was secured not only by the mortgage of property but also by the personal guarantee given by borrowers of Housing loan – Held, Bank is right in its contention that there being common borrowers in the Hosing Loan Account as well as in the loan account of company the properties in both the loan accounts have a charge of the respondent Bank and as such the respondent Bank is not liable to release any property till the dues of both the loan accounts are cleared by the borrowers.

(Para 21)

B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13 – Constitution of India, Article 226 -- Recovery of bank dues – Extension of time -- Petitioners though manifesting their intention to clear the amount, have not cleared that amount -- They want another six months to clear the same -- Bank cannot be expected to wait endlessly for the petitioners to clear the amount at their convenience -- There is no illegality in the action of the respondent Bank in proceeding to issue Possession Notice and take all consequential steps as per law to realise their outstanding amount.

(Para 23)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13 – Constitution of India, Article 226 -- Notice under SARFAESI Act -- OTS/ One time settlement policy of Bank – Non-acceptance of -- Writ jurisdiction -- Outstanding amount disputed by the petitioner -- Disputed questions of fact cannot be gone into in exercise of writ jurisdiction -- Scope of judicial review is to examine whether in arriving at a decision on revised OTS proposal, the Bank followed the prescribed procedure -- Offer declined on the ground that OTS amount offered is on lower side than earlier settlement -- Writ petition is accordingly dismissed.

(Para 21-26)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 14 – Application u/s 14 of the Act by PNB for physical possession of mortgage property -- P&S Bank wrongly took physical possession of property -- Patwari clarified description of property -- Writ petition disposed of with a direction to Deputy Commissioner to take action in accordance with law by passing an appropriate order by considering the report of the patwari concerned within a period of two weeks – P&S Bank also directed to hand over the physical possession of the mortgaged property to the Authorized Officer of PNB.

(Para 4-6)

A. Constitution of India, Article 226 – Banking default case -- One Time Settlement/ OTS – Extension of time – Writ jurisdiction --  One Time Settlement is not cloaked with such rigorous principles which may not permit extension of period to pay the remaining/balance settlement amount -- Extensions can be considered to be granted to deserving cases -- Held, Court in exercise of its jurisdiction under Article 226 of the Constitution of India would have the jurisdiction to extend the period of settlement as originally provided for, in the OTS letter.

(Para 22-24)

B. Constitution of India, Article 226 – Banking default case -- One Time Settlement/ OTS – Extension of time – Illustrative guidelines framed to be considered cumulatively or individually, on case to cases basis, some of them would be :-

i. The Original Time provided in the Settlement – the first and foremost aspect to be noticed would be the time period originally granted by the bank to pay off the settlement amount. If the time period originally stipulated in the settlement letter to pay off the settlement amount is short or is not excessive, the case for extension then could be considered. It is to be noticed that the borrower is to arrange funds to complete the OTS. If reasonable time period is not given, the very purpose of settlement would be defeated. In that eventuality application for extension can be considered so that the borrower gets a reasonable time to clear off the settlement amount and the ultimate purpose of settlement is achieved.

ii. Extent of payments already deposited under the settlement or before filing of the petition – While considering an application for extension of time under OTS, the prime objective to be noticed is the intention of the borrower to culminate the settlement. If the borrower has already paid substantial amounts, to the creditor under the OTS, and for some remaining amounts, is seeking a reasonable extension, such requests can be considered favourably. This shows, that the applicant had an intention to clear the settlement and the deposit of substantial amounts, is an indication in this regard.

iii. Reasons which led to delay in payment – It is important to notice, the reasons, which led to the delay on the part of the borrower. If the borrower was prevented by certain reasons or circumstances beyond his control it could be a reason to consider an application for extension favourably. It would be imperative for the borrower to show, that he made his best efforts to ensure that the requisite amounts, are arranged within the specified time, but inspite of all his best efforts, he could not arrange for the same.

iv. Payments having been accepted by the Bank / Financial Institution , after the stipulated date – If the bank or the Financial Institution has been accepting the payments from the borrower towards the settlement even after the stipulated period of time, it shows that the time was not the essence of contract. It would be apparent from such conduct of the parties, that certain amount of relaxation or flexibility in making the payment of OTS amount is reserved between the parties.

v. Bona fide Intent of the borrower to pay the remaining amounts under the settlement – In order to test the bonafide intention of such an applicant, it could be reasonably be tested while asking such an applicant to deposit some further amount, towards the balance amount before calling upon the bank to consider the issue of extension. If such amounts are deposited under the orders of Court and the bonafides are established, such an applicant would be entitled for a favourable consideration of an application for extension.

Caveat added, that if for any reason, the effort does not lead to extension of time, as prayed for by the petitioner, then the amounts deposited by the borrower/depositors under the interim orders of the Court, would have to be returned back by the creditor to the petitioner.

vi. Time period being demanded by the applicant to clear the remaining / balance settlement amount. – An applicant whose intention would be to clear the balance settlement amounts, would not claim for an unreasonable period of an extension, as otherwise, the intention would be to gain more time, without any actual intent to clear the settlement. In the facts and circumstances of each case, the Courts would therefore determine a reasonable period, to enable the borrower to clear the remaining settlement amount, subject ofcourse, to payment of reasonable interest for the delayed period, to balance the equities.

vii. Attending factors and circumstances– Attending factors and circumstances involved, while making an application for extension play an important role to identify eligible and deserving cases as also to determine the extent of extension to be granted. For example, the current situation where the entire country has been adversely effected on account of COVID-19 pandemic, the difficulties in arranging the amounts could be taken note of while determining the period of extension to be granted to an applicant. Further, accounts which have suffered losses and became NPA on account of having suffered natural calamities, unfortunate accidents, fire incidents, thefts, damage by floods , storms etc. and have come forward for an eventual settlement, can also be considered for extension of time.

viii. Irreparable loss and injury to the applicant – While examining an application for extension of settlement, it could also be seen to be noticed, the extent of an injury to be suffered by an applicant.

Guidelines/factors are not exhaustive but only illustrative for guidance of the parties and the courts while considering the prayer for extension of the time under by OTS by the borrower on case to case basis -- Courts would be free to consider the credentials of the borrower as well, being an equitable and discretionary relief.

(Para 25)

C. Constitution of India, Article 226 – Banking default case -- One Time Settlement/ OTS – Extension of time – Petitioner paid substantial portion of the same and is willing to pay the remaining with interest -- Current attending circumstances, of widespread of COVID-19 pandemic – Petitioners held entitled to extension of time for 6 months to repay the remaining settlement amount – Petitioners shall also pay interest @ 9% p.a. simple on the delayed payments on reducing balance payable w.e.f. 01.06.2019 i.e. the closing date of the settlement/OTS.

(Para 26-30)

D. Insolvency and Bankruptcy Code, 2016 (31 of 2016), Section 14(1)(a) -- Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Provider and Application to Adjudicating Authority) Rules, 2019, Rule 5 – Constitution of India, Article 226 -- One Time Settlement/ OTS – Extension of time – Maintainability of writ petition – Whether the present petition is maintainable in view of the proceedings pending before National Company Law Tribunal – Intent to restrict initiation or continuation of proceedings against a Corporate Debtor is to preserve its assets so that during Corporate Insolvency Resolution Process (CIRP), the Corporate Debtor is subjected to remedial acts to improve its financial condition – Answered in AFFIRMATIVE and held that in the peculiar facts and circumstances of the present petition, the petition would be maintainable.

(Paras 13, 33-37)

Insolvency and Bankruptcy Code, 2016 (31 of 2016), Rule 36A -- Resolution plan – Publication in newspaper -- Regulation 36A, as it stood during the period from 06.02.2018 to 04.07.2018, did not mandate the publication of the invitation of Resolution Plans, either in Form G or otherwise, in newspapers – It is only the amended Regulation 36A, which came into effect from 04.07.2018, that requires the publication of Form G in newspapers – Held, publication in newspapers made by the Resolution Professional on 30.03.2018 was something that was statutorily not required of him and hence the Promoter/Director of the corporate debtor cannot take advantage of the amendment that came later, to attack the advertisement -- This has not been appreciated by NCLAT, therefore, the NCLAT was wrong in its approach even in this regard -- Civil Appeals allowed, the impugned order of the NCLAT set aside.

(Para 45-47)

Constitution of India, Article 226 – Bank trying to take possession of financed-truck forcibly – Protection from -- Transport activities must have affected adversely because of lockdown period due to the prevailing Covid-19 pandemic -- Petitioner has offered to clear the outstanding installments within an outer period of 2 ½ months – Offer reasonable, petition disposed of with a direction that in case the petitioner submits an undertaking within 15 days alongwith 50% of the outstanding amount to respondent-Bank, with further undertaking that he will clear the remaining outstanding amount in another 2 months, meaning thereby that he will clear the outstanding installments in 2 ½ months', the vehicle of the petitioner shall not be forcibly taken by the respondents.

(Para 2,3,7)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 17 -- Legal Services Authorities Act, 1987 (39 of 1987), Section 22C – Constitution of India, Article 226 -- Public Utility services -- Proceedings under SARFAESI ACT, 2002 – Application u/s 22C before Permanent Lok Adalat filed -- Rs. 2 lacs deposited by petitioner in pursuant to an interim order passed by High Court -- Petitioners are willing to deposit another sum of Rs. 2 lacs within a week – Direction given to Permanent Lok Adalat to consider and decide the dispute raised by the petitioners within a period of four months -- Interim arrangement made by High Court regarding non-taking of coercive steps shall continue to remain in operation.

(Para 3-5)

Constitution of India, Article 226 -- Covid-19 situation – Banking loan – Non-performing assets -- One-time settlement with Bank – Extension of time – Held,  when the bank has already declared the petitioner as a willful defaulter and his account is classified as 'NPA', nothing much could be realized by selling the property, as the property rates in the country are also plummeted – In the present situation, there shall be renegotiation between the petitioner and Bank – Direction given to bank to consider the prayer of the petitioner sympathetically and extend the time at least for a period of 10-12 months from this day or atleast a period of 6 months after completion of Pandemic situation in the country to enable him to raise necessary funds and to clear the loan as he had agreed under one time settlement scheme of the 1^st respondent.

(Para 4, 5)

Electricity Act, 2003 (36 of 2003), Section 56 – Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13 -- Auction sale – Arrears of electricity dues – Liability of purchaser : 

--       Electricity dues, where they are statutory in character under the Electricity Act and as per the terms & conditions of supply, cannot be waived in view of the provisions of the Act itself more specifically Section 56 of the Electricity Act, 2003 (in pari materia with Section 24 of the Electricity Act, 1910), and cannot partake the character of dues of purely contractual nature.

--       Where, as in cases of the E-auction notice in question, the existence of electricity dues, whether quantified or not, has been specifically mentioned as a liability of the purchaser and the sale is on “AS IS WHERE IS, WHATEVER THERE IS AND WITHOUT RECOURSE BASIS”, there can be no doubt that the liability to pay electricity dues exists on the respondent (purchaser).

--       The debate over connection or reconnection would not exist in cases like the present one where both aspects are covered as per clause 8.4 of the General Terms & Conditions of Supply.

(Para 15)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 2(1)(c), 13 -- Banking Regulation Act, 1949 (10 of 1949), Section 5(b), 5(c), 6, 56(a) – Multi-State Co-operative Societies Act, 2002 (39 of 2002), Section 3(f), 84(2) -- Constitution of India, Article 254, Seventh Schedule, List I Entry 45, List II Entry 32 -- Banking Companies -- Co-operative Banks run by Co-operative Societies – Governance of -- Applicability of SARFAESI Act – Reference question answered:

(1) Whether 'co-operative banks', which are co-operative societies also, are governed by Entry 45 of List I or by Entry 32 of List II of the Seventh Schedule of the Constitution of India, and to what extent?

--       Co-operative banks registered under the State legislation and multi-State level co-operative societies registered under the MSCS Act, 2002 with respect to 'banking' are governed by the legislation relatable to Entry 45 of List I of the Seventh Schedule of the Constitution of India.

--       Co-operative banks run by the co-operative societies registered under the State legislation with respect to the aspects of 'incorporation, regulation and winding up', in particular, with respect to the matters which are outside the purview of Entry 45 of List I of the Seventh Schedule of the Constitution of India, are governed by the said legislation relatable to Entry 32 of List II of the Seventh Schedule of the Constitution  of India.

(2) Whether ‘banking company’ as defined in Section 5(c) of the BR Act, 1949 covers co-operative banks registered under the State Co-operative Laws and also multi-State co-operative societies?

--       Co-operative banks involved in the activities related to banking are covered within the meaning of 'Banking Company' defined under Section 5(c) read with Section 56(a) of the Banking Regulation Act, 1949, which is a legislation relatable to Entry 45 of List I

--       It governs the aspect of 'banking' of co-operative banks run by the co-operative societies -- Co-operative banks cannot carry on any activity without compliance of the provisions of the Banking Regulation Act, 1949 and any other legislation applicable to such banks relatable to 'Banking' in Entry 45 of List I and the RBI Act relatable to Entry 38 of List I of the Seventh Schedule of the Constitution of India.

(3)(a) Whether co-operative banks both at the State level and multi-State level are 'banks' for applicability of the SARFAESI Act?

--       Co-operative banks under the State legislation and multi-State co-operative banks are ‘banks’ under section 2(1)(c) of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

--       Recovery is an essential part of banking; as such, the recovery procedure prescribed under section 13 of the SARFAESI Act, a legislation relatable to Entry 45 List I of the Seventh Schedule to the Constitution of India, is applicable.

(3)(b) Whether provisions of Section 2(c) (iva) of the SARFAESI Act on account of inclusion of multi-State co-operative banks and notification dated 28.1.2003 notifying co-operative banks in the State are ultra vires?

--       Parliament has legislative competence under Entry 45 of List I of the Seventh Schedule of the Constitution of India to provide additional procedures for recovery u/s 13 of the SARFAESI Act with respect to co-operative banks

--       Provisions of Section 2(1)(c)(iva), of SARFAESI Act, adding “ex abundanti cautela”, ‘a multi-State co-operative bank’ is not ultra vires as well as the notification dated 28.1.2003 issued with respect to the co-operative banks registered under the State legislation.

(Para 18, 102)

Joint Bank Account – Money lying therein – Belongs to whom -- Joint account means that either of the joint account holder can operate that account but it does not mean that money lying therein belongs to a joint account holder who has otherwise not contributed in respect of deposits made therein.

(Para 4)

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13, 17, 34 -- Guidelines of Reserve Bank of India dated 17.3.2016 -- Code of Civil Procedure, 1908 (V of 1908), Order 39 Rule 1 & 2, Section 9 – Proceedings under SARFAESI Act – Civil Suit -- Application under order 39 Rule 1 & 2 -- Maintainability of -- Question of jurisdiction – Stage of – RBI guidelines providing for revival and rehabilitation of Micro, Small and Medium Enterprises (MSME) with loan limits upto 25 crores, sending the case to the Committee before initiating any appropriate action under the SARFAESI Act – Trial Court dismissed the application as barred u/s 34 of the 'SARFAESI Act' -- Lower Appellate Court, relying upon guidelines of RBI dated 17.3.2016, reversed the order of the trial Court – Challenged by Bank in revision -- Held;

-- Whether the company of the plaintiffs falls under MSME or not would be a question of fact to be debated before the trial Court at the relevant stage with reference to the evidence to be led by the parties.

-- For grant of temporary injunction, three principles are required to be appreciated i.e. existence of prima facie case, balance of convenience and irreparable loss to be caused in the event of non grant of temporary injunction

-- Court having no jurisdiction can pass interim order till such time issue of jurisdiction is decided by the Court on merits.

No justification to interfere in revision petition, same is dismissed.

(Para 2-4)

Constitution of India, Article 226 -- Bank default case -- Sale notice by bank – Co-sharer of property not a mortgagor or guarantor – Demarcation of -- Right of -- Until and unless the mortgaged property is demarcated and the possession is taken thereof, it cannot be put to sale as the petitioner is stated to be a co-sharer in the property who is neither a borrower nor a guarantor – Writ petition withdrawn to file a detailed reply to the notice – Bank directed to consider the said reply/objection positively and decide the same before proceeding further in respect of the sale of the mortgaged property.

(Para 2-6)

A. SARFAESI/ Banking Law -- Reducing the disbursing power by bank -- Opportunity of hearing -- Rule of natural justice -- Due opportunity of hearing and explaining the factual position alongwith documentary proof is required to be given to the borrower to support his claim -- Principles of natural justice are required to be followed when a quasi-judicial body engages in determining disputes between the parties or administrative action is taken which involves civil consequences -- Held, that in view of the principles of equity and natural justice, an opportunity is required to be provided to the borrower before the creditor modifies or reduces the disbursing power.

(Para 10-13)

B. Banking Regulation Act, 1949 (10 of 1949), Section 21, 35A -- Master Circular – Prudential Norms on Income Recognition, Asset, Classification and provisioning pertaining to Advances dated 01.07.2015,  Clause 2.1, 4 – R.B.I. is entitled to formulate the policies which the Banking Companies are bound to follow -- Circular provides for the manner in which a loan account is to be declared NPA, recovery and the management of the loan accounts -- Every NPA would fall either in the category of sub-standard or doubtful or loss asset -- A non performing asset is a loan or an advance where interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan or the account remains ‘out of order’ in respect of an overdraft/cash credit. With effect from March 31, 2005

-- a substandard asset would be one which has remained NPA for a period less than or equal to 12 months.

-- An asset would be classified as “doubtful” if it has remained in the substandard category for a period of 12 months.

-- A “loss asset” is one where loss has been identified by the Bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.

In respect of accounts where there are potential threats for recovery on account of erosion in the value of security or non-availability of security and existence of other factors such as frauds committed by borrowers, it will not be prudent that such accounts should go through various stages of asset classification -- Such NPAs may be straightaway classified under doubtful category.

(Para 15-19)

C. Banking Regulation Act, 1949 (10 of 1949), Section 21, 35A -- Master Circular–Prudential Norms on Income Recognition, Asset, Classification and provisioning pertaining to Advances dated 01.07.2015 issued by RBI, Clause 2.1, 4 -- SARFAESI/ Banking Law -- Non-Performing Assets – Repayment of arrears and interest – Regularisation of account -- Held, where the borrower expresses willingness for regularizing the loan account by discharging the arrears of interest and principal, the Bank/financial institutions are obligated to accept the same as per mandate expressed in the Master Circular dated 01.07.2015 issued by the Reserve Bank of India in exercise of powers under the 1949 Act and declare the account to be ‘Standard’ account.

(Para 20)

D. Banking Regulation Act, 1949 (10 of 1949), Section 21, 35A -- Master Circular–Prudential Norms on Income Recognition, Asset, Classification and provisioning pertaining to Advances dated 01.07.2015 issued by RBI, Clause 2.1, 4 -- SARFAESI/ Banking Law -- Non-Performing Assets – Declaration of – Opportunity of hearing -- Petitioner was not afforded any opportunity before reducing the disbursing power and declaring the account as NPA – As per clauses 4.2.4 and 4.2.5 of the Master Circular dated 01.07.2015 issued by the RBI, the petitioner could remove the temporary deficiencies in the maintenance of account as standard and to upgrade the account so as to be out of NPA – Held, notice was required to be issued to the petitioner under the provisions of the SARFAESI Act by the Bank before declaring its account as NPA -- Accordingly, the impugned letter/email dated 27.6.2018 (declaration of NPA) and all consequential action taken on that basis are set aside.

(Para 21)

A. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(4), 17(1) -- Security Interest (Enforcement) Rules, 2002, Rule 8(1), 8(2), 8(3) -- -- Constructive possession by Secured Creditor -- Application before DRT u/s 17(1) of SARFAESI Act – Maintainability of -- Whether an application u/s 17(1) of the SARFAESI Act at the instance of a borrower, is maintainable even before physical or actual possession of secured assets is taken by banks/financial institutions – Rule 8(1) and 8(2) refer to constructive possession whereas rule 8(3) refers to physical possession – Held, borrower/debtor can approach the Debts Recovery Tribunal under section 17 of the Act at the stage of the possession notice referred to in rule 8(1) and 8(2) of the 2002 Rules.

(Para 2, 25)

B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (54 of 2002), Section 13(6) -- Security Interest (Enforcement) Rules, 2002, Rule 8(8),8(9) -- Possession taken by Secured Creditor -- Whether he will become owner -- Secured creditor remains a secured creditor even after possession is taken over as the fiction contained in section 13(6) does not convert the secured creditor into the owner of the asset, but merely vests complete title in the transferee of the asset once transfer takes place in accordance with rules 8 and 9 of the 2002 Rules.

 (Para 24)