Tag: secured creditor

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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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Court judgement reaffirms that if a Special Leave Petition under Article 136 of the Constitution is unconditionally withdrawn without seeking liberty to file a fresh one, a second SLP challenging the same order is not maintainable.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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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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Landmark Ruling: Supreme Court Bars Prosecution of Company Directors Without Suing the Company First
30Sep By The Legal ChamberNo Comments
Supreme Court

Landmark Ruling: Supreme Court Bars Prosecution of Company Directors Without Suing the Company First

The Supreme Court quashed the criminal defamation proceedings against the bank officials. It held that for offences under the Indian Penal Code, there is no concept of vicarious liability. Prosecuting officers without arraigning the company as an accused and without specific allegations of their culpable role is impermissible and an abuse of process. Facts Of The Case: The case originated from a loan default by Phoenix India, which had secured credit facilities from the Bank of Baroda. After the firm's account was classified as a non-performing asset, the Bank initiated recovery under the SARFAESI Act. A critical error occurred when the Bank issued a symbolic possession notice under Section 13(4) of the Act, which inadvertently quoted the outstanding dues as approximately Rs. 56.15 cro...
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Who Gets Paid First? Supreme Court Reopens Case on Priority Between Employee Provident Fund and Secured Lenders
30Sep By The Legal ChamberNo Comments
Supreme Court

Who Gets Paid First? Supreme Court Reopens Case on Priority Between Employee Provident Fund and Secured Lenders

The Supreme Court remanded the matter to the High Court to determine the priority of charges between the EPFO, under Section 11(2) of the Employees' Provident Fund Act, 1952, and secured creditors, including Axis Bank, under Section 35 of the SARFAESI Act, 2002. The core legal issue for fresh adjudication is the conflict between the statutory first charge of EPFO dues and the primacy claimed by secured creditors. Facts Of The Case: M/s Acropetal Technologies Pvt. Ltd. defaulted on its Employees' Provident Fund (EPF) dues from July 2013. The EPFO determined a liability and, upon learning the company's properties were to be auctioned by various banks, invoked its priority under the EPF Act. The EPFO specifically asserted a first charge over the 'Attibele property' being auctioned by Axis B...
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Supreme Court Quashes Decree Against Odisha Corp, Clarifies Law on Interest for Pre-1992 Transactions
5Sep By The Legal ChamberNo Comments
Supreme Court

Supreme Court Quashes Decree Against Odisha Corp, Clarifies Law on Interest for Pre-1992 Transactions

The Supreme Court held that the suit against the State Financial Corporation was not maintainable due to non-compliance with the mandatory notice under Section 80 CPC. The decree was declared a nullity as it erroneously applied the Interest on Delayed Payments Act, 1993, to a pre-enactment transaction and fastened liability without privity of contract. Execution proceedings were quashed. Facts Of The Case: In 1985, Respondent No. 1, M/s. Vigyan Chemical Industries, supplied raw materials to Respondent No. 2, an industrial unit. Due to a loan default, the Appellant, Odisha State Financial Corporation (OSFC), took possession of Respondent No. 2's unit in 1987 under the State Financial Corporations Act, 1951. In 1988, Respondent No. 1 filed a recovery suit for its unpaid dues. OSFC was impl...
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Supreme Court Rules on Tenant Rights vs. Bank’s SARFAESI Powers
8Aug By The Legal ChamberNo Comments
Supreme Court

Supreme Court Rules on Tenant Rights vs. Bank’s SARFAESI Powers

The Supreme Court held that tenants claiming rights under unregistered agreements cannot override SARFAESI proceedings. Relying on Bajarang Shyamsunder Agarwal, it ruled that oral/unregistered tenancies cannot extend beyond one year post-Section 13(2) notice. The Court emphasized that tenants must prove prior lawful possession with documentary evidence and barred High Courts from interfering under Article 227 when statutory remedies under SARFAESI exist. The judgment reaffirms the primacy of secured creditors' rights over unsubstantiated tenancy claims. Facts Of The Case: The case involved a dispute between PNB Housing Finance Limited (Appellant) and Sh. Manoj Saha (1st Respondent) over the possession of a secured asset—a 450 sq. ft. space in Kolkata. The 1st Respondent claimed to be a t...
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