Borrower’s Plea Based on a False Claims Preventing Bank From Taking Possession of Secured Assets Was to Be Dismissed | HC

Case Details: Siba International v. Union Bank of India - [2024] 160 taxmann.com 108 (HC-Delhi)

Judiciary and Counsel Details

• • Manmeet Pritam Singh Arora, J.
  • Chetan Joshi, Adv. for the Petitioner.
  • Divyank Dutt Dwivedi, Adv. Kartik Sharma, Ms Prashansa Sharma & Santosh Kr. Tripathi for the Respondent.

Facts of the Case

In the instant case, the borrower obtained the loan from the respondent bank and mortgaged its immovable properties to secure the said loan.

Since, the loan remained unpaid, the bank approached the District Magistrate (DM) under section 14 of the SARFAESI Act, 2002 seeking assistance in taking possession of secured assets, which was allowed by the DM.

The Debt Recovery Tribunal (DRT) dismissed the borrowers’ interim application seeking to injunct the bank from taking possession of secured assets. The borrower thus, preferred an appeal before the Debt Recovery Appellate Tribunal (DRAT).

The DRAT directed the borrower to make a pre-deposit of 50% of the amount of debt and directed that the appeal would be heard after the said deposit was made. However, the borrower without making a pre-deposit approached the Writ Court by way of a writ petition.

The Writ Court allowed the said petition upon an undertaking given by the borrower to deposit the said amount within 60 days of the said order. The borrower failed to make the deposit. Therefore, in view of the default of undertaking, the writ court permitted the bank to take possession of the secured assets. Subsequently, in accordance with the SARFAESI Act, the bank served the petitioner with an e-auction notice of the mortgaged property.

The borrower sought restoration of the writ petition by giving a fresh undertaking, but once again failed to make payment on or before the due date.

High Court Held

The High Court held that since, the petitioner was served with demand notice u/s 13(2) and the petitioner despite having failed to point out any illegality in actions taken by the bank under the SARFAESI Act, had succeeded in preventing the bank from proceeding in law against taking physical possession of secured assets by making representation before the DRT and the High Court with respect to its intention to clear dues.

The High Court concluded that the petitioner was not entitled to consequential relief of restraint against the bank and accordingly, dismissed the instant petition.