In debt recovery cases, money deposited with the Bank to establish bonafides to be treated as money deposited with the registry of the Court: SC
M/s Kut Energy Pvt. Ltd. (company/appellant) had entered into an agreement with the Government of Himachal Pradesh in 2008 for setting up 24 MW Kut Hydro Electric Project in Shimla District. For commissioning the said project, loan was availed from the consortium of Punjab National Bank (the Bank), Corporation Bank and Central Bank of India.In 2015, the account of the appellant was declared...
M/s Kut Energy Pvt. Ltd. (company/appellant) had entered into an agreement with the Government of Himachal Pradesh in 2008 for setting up 24 MW Kut Hydro Electric Project in Shimla District. For commissioning the said project, loan was availed from the consortium of Punjab National Bank (the Bank), Corporation Bank and Central Bank of India.
In 2015, the account of the appellant was declared as Non Performing Asset (NPA) by the Bank. A demand notice was thereafter issued by the Bank under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act) in March 2017. The amount due to the Bank was stated to be Rs.106,07,91,644/-.
In August 2017, a possession notice under Section 13(4) of the SARFAESI Act was issued by the Bank in respect of the Project in question. A sale notice was issued in terms of which the concerned properties were to be sold by e-auction with a reserve price of Rs.120 crores. Thereafter, the appellants made an offer of Rs. 140 crores as a one-time settlement (OTS).
The appellants established their bona fides and contended before the High Court of Himachal Pradesh at Shimla that they were willing and ready to deposit a sum of Rs.140 crores with the Bank. The appellants had deposited a sum of Rs.40 crores. The High Court held that the deposit with the bank ought to be treated to be a deposit in the Registry of the Court.
Subsequently, the Bank filed a petition seeking appropriation of amount of Rs.40 crores deposited by the appellants. On the other hand, the appellants filed a Writ Petition for refund of the said amount of Rs.40 crores. The High Court disposed these applications.
The Bank challenged the order of the High Court by filing Special Leave Petition in the Supreme Court, submitting inter alia that the High Court ought not to have interfered in the matter while exercising writ jurisdiction, as alternate remedy was available to the appellants.
The Supreme Court citing Axis Bank vs. SBS Organics (P) Ltd. ruled that the money was expressly to be treated to be with the Registry of the High Court. The Court held that the appellants were entitled to withdraw the sum deposited by them in terms of the order of the High Court. The deposit was not towards satisfaction of the debt in question and that is precisely why the High Court had directed that the deposit would be treated to be a deposit in the Registry of the High Court.
The Supreme Court emphasized on the law laid down in the Axis Bank case that ‘secured creditor’ would be entitled to proceed only against the ‘secured assets’ mentioned in the notice under Section 13(2) of the SARFAESI Act. The Bank shall not be entitled to lien over such deposits. On the strength of law laid down in the Axis Bank case, the Court directed that the amount deposited by the appellants be returned to them.
A Bench of Justices Uday Umesh Lalit and Vineet Saran presided over the case.