04/11/2022

Cheques encashed wrongly/fraudulently would squarely fall within the ambit of a ‘debt’ under Section 2(g) of RDB Act, 1993 and enables the Bank wrongly deprived their money to recover it – Bank of Baroda Vs. Mr Ramesh C. Bhuptani & Ors. – DRAT Mumbai

DRAT held that the defendants Nos. 1, 3, 5 and 7 to 9 had received the amount in their accounts consequent to the presentation of the cheques to the Appellant Bank and were and enriched by the amounts they received. The cheques were wrongly/fraudulently encashed by them, even though it may not be with their active participation in the fraud, they had been recipients of the amount fraudulently from the Appellant Bank. Under the circumstances, the amount that they received would squarely fall within the ambit of a ‘debt’ under Sec. 2(g) and enables the Bank wrongly deprived their money to recover it. In case the said defendants had received money that was legally due to them from others, their remedy to recover that amount lies elsewhere and not by fraudulent means deployed to extract money from the bank undeservedly. It may also be true that they were not guilty of fraud themselves or may even have been victims of the fraud, but that would not permit them to defend their case and retain the illegally earned money that comes into their account from the Appellant Bank.

Cheques encashed wrongly/fraudulently would squarely fall within the ambit of a ‘debt’ under Section 2(g) of RDB Act, 1993 and enables the Bank wrongly deprived their money to recover it – Bank of Baroda Vs. Mr Ramesh C. Bhuptani & Ors. – DRAT Mumbai Read Post »

The remedies available to a lender for enforcing a Security Interest cannot be encroached upon by any Arbitral mechanism provided in section 11 of the SARFAESI Act – Bell Finvest India Ltd. & Ors Vs. AU Small Finance Bank Ltd. – Delhi High Court

Hon’ble High Court held that the remedy of arbitration provided in section 11 of the SARFAESI Act cannot override the special remedies stipulated under the set of special laws, viz. the SARFAESI Act and the RDB Act; and therefore even statutory arbitration cannot derogate from a remedy available to a lender for enforcing a security interest and the ‘doctrine of election’ is simply not available. Accordingly, disputes that would be covered by section 11 of the SARFAESI Act are those which deal with the rights of secured creditors inter-se, since the SARFAESI Act proceeds on the basis that the liability of the borrower has been crystallized and the borrower’s account has been classified as a non-performing asset in the hands of the financial institution. In the present case, the prayer seeking reference of disputes to arbitration, especially when such disputes are already subject matter of proceedings before the DRT, Jaipur and the DRAT, New Delhi, is therefore, wholly misconceived.

The remedies available to a lender for enforcing a Security Interest cannot be encroached upon by any Arbitral mechanism provided in section 11 of the SARFAESI Act – Bell Finvest India Ltd. & Ors Vs. AU Small Finance Bank Ltd. – Delhi High Court Read Post »

High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India – State Bank of India Vs. Arvindra Electronics Pvt. Ltd. – Supreme Court

It is an admitted position that the borrower did not make the payment due and payable under the sanctioned OTS Scheme on or before the date mentioned in the sanctioned letter. The prayer of the borrower for extension of nine months came to be rejected as far as back on 16.05.2018 and the borrower was directed to make the payment of Rs.2.52 crores by 21.05.2018, the borrower failed to make the payment. Even otherwise as rightly submitted on behalf of the Bank directing the Bank to reschedule the payment under OTS would tantamount to modification of the contract which can be done by mutual consent under Section 62 of the Indian Contract Act. 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. Therefore, borrowers were bound to make the payment as per the sanctioned OTS Scheme. Therefore, the High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India.

High Court ought not to have granted further extension de hors the sanctioned OTS Scheme while exercising the powers under Article 226 of the Constitution of India – State Bank of India Vs. Arvindra Electronics Pvt. Ltd. – Supreme Court Read Post »

The date of default and acknowledgement are two different events and date of default is not dependent on acknowledgement of debt, NCLAT imposes a penalty of Rs. 25 lakh since filing IBC Section 9 application was an attempt to stop the implementation of RERA order – SLB Welfare Association Vs. M/s PSA IMPEX Pvt. Ltd. – NCLAT New Delhi

NCLAT imposed a penalty of Rs.25 lakh on M/s. Rudra Buildwell Constructions Pvt. Ltd. under Section 65 of IBC. NCLAT concluded that initiation of CIRP by the Operational Creditor was done fraudulently with the purpose other than insolvency resolution, the initiation of proceeding by Operational Creditor deserves to be set aside with imposition of penalty under Section 65.
When the date of default given by Operational Creditor in Section 9 Application is 31.03.2020, the mere fact that acknowledgement has been given by Corporate Debtor on 03.06.2021 accepting the debt, shall not change the date of default. We, thus, do not agree with the reasons given by the Adjudicating Authority that since acknowledgement is 03.06.2021, the date of default will become 03.06.2021. The date of default and acknowledgement are two different events and date of default is not dependent on acknowledgement of debt.
It also held that object of filing Section 9 Application by the Operational Creditor was not for resolution of insolvency of Corporate Debtor, but was an attempt to stop the implementation of RERA order and to take back the Project from the Appellant.

The date of default and acknowledgement are two different events and date of default is not dependent on acknowledgement of debt, NCLAT imposes a penalty of Rs. 25 lakh since filing IBC Section 9 application was an attempt to stop the implementation of RERA order – SLB Welfare Association Vs. M/s PSA IMPEX Pvt. Ltd. – NCLAT New Delhi Read Post »

As per Section 11 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, provident fund due has priority of payment of contributions over other debts – Axis Bank Ltd. Vs. The Assistant Provident Fund Commissioner & Recovery Officer – Madras High Court

Hon’ble High Court held that as there is no security interest is created on the fixed deposit and only lien is created and the lien is not classified as secured interest under the SARFAESI Act, it cannot be contended that they are secured creditor. As per Section 11 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, provident fund due has priority of payment of contributions over other debts.

As per Section 11 of the Employees Provident Funds and Miscellaneous Provisions Act, 1952, provident fund due has priority of payment of contributions over other debts – Axis Bank Ltd. Vs. The Assistant Provident Fund Commissioner & Recovery Officer – Madras High Court Read Post »

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