Securitisation Act - The Legal Chamber

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...

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...

Supreme Court Judgment: Banks Can Classify MSME Loans as NPA Without Prior “Stress Identification”

The Supreme Court held that the obligation to identify incipient stress under the MSME Rehabilitation Framework is not a mandatory precondition for a bank to classify an account as an NPA or issue a demand notice under the SARFAESI Act. The benefit of the Framework must be actively claimed by the MSME borrower in response to a notice under Section 13(2), supported by an affidavit, which then obligates the bank to consider the claim and pause recovery actions. Facts Of The Case: An MSME-registered enterprise, Shri Swami Samarth Construction & Finance Solution, had availed a loan from NKGSB Co-operative Bank. Upon defaulting on repayments, its account was classified as a Non-Performing Asset (NPA). The bank's authorized officer subsequently issued a demand notice under Section 13(2) of...