Tag: Banking Law

Supreme Court Ruling: Defective Affidavit Can Be Corrected in Insolvency Petitions
10Feb By The Legal ChamberNo Comments
Supreme Court

Supreme Court Ruling: Defective Affidavit Can Be Corrected in Insolvency Petitions

The Supreme Court held that a defective affidavit filed in support of a Section 7 IBC application is a curable procedural irregularity and does not render the application non est. The Court emphasized that the mandatory notice under Section 7(5)(b) of the IBC must be specifically issued to the applicant before rejection, and procedural rules should not defeat substantive rights. Facts Of The Case: HDFC Bank filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against Livein Aqua Solutions Pvt. Ltd. for a defaulted loan of ₹5.5 crores. The application, verified on July 26, 2023, was supported by an affidavit deposed on July 17, 2023. The NCLT Ahmedabad Bench rejected the petition at the threshold, citing this date discrepancy in the affidavit as a fatal ...
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SARFAESI Act vs EPF Act: Supreme Court Says Provident Fund Charge Prevails Over Bank
9Feb By The Legal ChamberNo Comments
Supreme Court

SARFAESI Act vs EPF Act: Supreme Court Says Provident Fund Charge Prevails Over Bank

This Supreme Court judgment interprets the interplay between the priority of secured creditors under Section 26E of the SARFAESI Act and the statutory first charge for provident fund dues under Section 11(2) of the EPF & MP Act. The Supreme Court held that the statutory first charge for provident fund contributions overrides the priority granted to secured creditors, even under a non-obstante clause in a later enactment. Facts Of The Case: The appellant, Jalgaon District Central Co-operative Bank Ltd., is a secured creditor which had advanced loans to a co-operative sugar society, secured by a mortgage and hypothecation of the society's assets. The sugar factory became defunct, leading to loan defaults. The bank initiated recovery under the SARFAESI Act, took possession o...
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Public vs. Private Wrong: Supreme Court Explains Why Bank Fraud Cases Can’t Be Quashed Just Because Bank Settled
2Feb By The Legal ChamberNo Comments
Supreme Court

Public vs. Private Wrong: Supreme Court Explains Why Bank Fraud Cases Can’t Be Quashed Just Because Bank Settled

The Supreme Court held that criminal proceedings involving serious economic offences, especially those under the Prevention of Corruption Act, cannot be quashed merely because a financial settlement or one-time settlement has been reached with the bank. Such offences constitute a crime against society at large, and quashing would be contrary to the interests of justice. Facts Of The Case: An FIR was registered in 2015 following a complaint by the State Bank of Bikaner and Jaipur. The bank alleged that M/s Sarvodaya Highways Ltd. had fraudulently secured credit facilities of ₹60 crores by submitting fabricated work orders and financial statements to project a false financial standing. An internal inquiry later declared the account a Non-Performing Asset, uncovering an alleged fraud of...
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Supreme Court Clarifies: Trustees Can Be Sued for Dishonored Cheques, Even If Trust Is Not Named as Accused
24Dec By The Legal ChamberNo Comments
Supreme Court

Supreme Court Clarifies: Trustees Can Be Sued for Dishonored Cheques, Even If Trust Is Not Named as Accused

This Supreme Court judgment holds that under the Negotiable Instruments Act, 1881, a Trust is not a juristic person capable of being sued. A complaint for a dishonored cheque issued on behalf of a Trust is maintainable against the Trustee who signed it, without needing to array the Trust itself as an accused. The ruling clarifies that vicarious liability attaches directly to the responsible Trustee. Facts Of The Case: The dispute arose from a financial arrangement concerning William Carey University. Facing a crisis, its sponsoring body, ACTS Group, entered an MoU with Orion Education Trust on 12.10.2017 to hand over the university's management. The Respondent, Vijaykumar Agarwal, was Orion's Chairman. In this capacity, he authorized the Appellant, Sankar Padam Thapa, to liaise wit...
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Supreme Court Rules: Bank’s Illegal Mortgage Voids Multi-Crore Property Auction
21Nov By The Legal ChamberNo Comments
Supreme Court

Supreme Court Rules: Bank’s Illegal Mortgage Voids Multi-Crore Property Auction

The Supreme Court quashed the e-auction sale as the proclamation violated Rule 53 of the Income Tax Act's Second Schedule, applicable via the RDDB Act. It failed to disclose material encumbrances, specifically DDA's claim for unearned increase. The Court held the sale was void, applying principles of restitution to refund the auction purchaser with interest. Facts Of The Case: The Delhi Development Authority (DDA) allotted a plot to Sarita Vihar Club on a leasehold basis. The club mortgaged the plot to Corporation Bank without obtaining the mandatory prior written consent from the Lieutenant Governor, as required by the lease deed. When the club defaulted on its loan, the Bank initiated recovery proceedings. The Debt Recovery Tribunal (DRT) ordered the sale of the plot. Despite DDA's obj...
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Supreme Court Says :Withdrawing a Case from Supreme Court Has a Cost: No Second Chance
13Nov By The Legal ChamberNo Comments
Supreme Court

Supreme Court Says :Withdrawing a Case from Supreme Court Has a Cost: No Second Chance

This Supreme Court judgement reaffirms that if a Special Leave Petition under Article 136 of the Constitution is unconditionally withdrawn without seeking liberty to file a fresh one, a second SLP challenging the same order is not maintainable. This principle, drawn from Order XXIII Rule 1 of the CPC, is grounded in public policy to prevent bench-hunting and ensure litigation finality. An appeal against an order merely dismissing a review petition is also not maintainable. Facts Of The Case: The appellant, Satheesh V.K., was a borrower who had defaulted on a loan from the Federal Bank, leading the bank to classify the account as a Non-Performing Asset (NPA) and initiate recovery under the SARFAESI Act. Challenging this action, Satheesh filed a writ petition in the Kerala High Cou...
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No Redemption After Auction Notice: Supreme Court Major Ruling on Bank Loan Recovery
10Nov By The Legal ChamberNo Comments
Supreme Court

No Redemption After Auction Notice: Supreme Court Major Ruling on Bank Loan Recovery

This Supreme Court judgment clarifies that the right of redemption of a mortgagor under Section 13(8) of the SARFAESI Act is extinguished upon the publication of the notice of sale, as per the 2016 amendment. The Court held that this amended provision is retrospective in operation and overrides the general right of redemption under the Transfer of Property Act, 1882. The ruling emphasizes that only a single composite notice of sale is required under the SARFAESI Rules, irrespective of the mode of transfer adopted by the secured creditor. Facts Of The Case: The borrowers, M/s KPK Oils and Proteins India Pvt. Ltd. and its guarantors, availed credit facilities from the respondent Bank in January 2016, creating an equitable mortgage over various properties. After the loan account was classif...
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Cheque Bounce Notice Must Demand Exact Cheque Amount, Rules Supreme Court
10Nov By The Legal ChamberNo Comments
Supreme Court

Cheque Bounce Notice Must Demand Exact Cheque Amount, Rules Supreme Court

In a significant ruling under the Negotiable Instruments Act, 1881, the Supreme Court held that a demand notice under Section 138 Proviso (b) must specify the exact cheque amount. Demanding a different sum, even due to a typographical error, renders the notice legally invalid and fatal to the complaint, as the provision mandates strict compliance. Facts Of The Case: The appellant, Kaveri Plastics, filed a complaint under Section 138 of the Negotiable Instruments Act, 1881, against the respondents. The case originated from a Memorandum of Understanding related to the sale of land. As part of this agreement, the accused company issued a cheque for Rs. 1,00,00,000/- in favour of the appellant. However, upon presentation, the cheque was dishonoured by the bank due to "insufficient fund...
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SBI Wins Case: Supreme Court Rules OTS Application Invalid Without Upfront Payment
5Nov By The Legal ChamberNo Comments
Supreme Court

SBI Wins Case: Supreme Court Rules OTS Application Invalid Without Upfront Payment

The Supreme Court held that a borrower's failure to comply with the mandatory upfront payment requirement under a One-Time Settlement (OTS) scheme renders the application incomplete and not entitled to processing. The Court further ruled that, in judicial review, an administrative order of rejection can be upheld on an alternative legal ground apparent from the record, provided the affected party is granted a fair opportunity to respond. Facts Of The Case: The respondent, Tanya Energy Enterprises, availed credit facilities from the State Bank of India (SBI) by mortgaging seven properties but subsequently defaulted on its repayment obligations. After its account was classified as a non-performing asset, SBI initiated recovery proceedings under the SARFAESI Act. A prior One-Time Settlement...
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Supreme Court Revives Cheque Bounce Cases, Says ‘Sick Company’ Status is Not a Get-Out-of-Jail Card
9Oct By The Legal ChamberNo Comments
Supreme Court

Supreme Court Revives Cheque Bounce Cases, Says ‘Sick Company’ Status is Not a Get-Out-of-Jail Card

The Supreme Court held that proceedings under Section 138 of the Negotiable Instruments Act are not automatically barred against a company declared sick under SICA, even if a restraint order under Section 22A exists. The nature of the restraint and the purpose of the cheque issuance are mixed questions of law and fact to be decided during trial based on evidence. Furthermore, a Magistrate lacks the inherent power to review or recall the issuance of summons. Facts Of The Case: The appellant, Shree Nagani Silk Mills Pvt. Ltd., supplied goods to the first respondent, L.D. Industries Ltd., which was declared a sick company by the BIFR. Towards the payment for these supplies, the accused company issued several cheques in 2001, which were subsequently dishonoured due to "insufficient funds"....
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