- Case Title: Jimmy Thomas V. Indian Bank Citation: 2023 LiveLaw (Ker) 241
interim orders passed by the Debts Recovery Tribunal under 17 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 cannot be issued mechanically and without application of mind. -Kerala High Court
- Case Title – Regional Manager, Union Bank of India and Anr. v. M/s Punya Coal Road Lines and Ors
Challenge To Recovery Notice U/S 13(2) SARFAESI Act Lies Before DRT And Not Civil Court, Unless Plaint Alleges Fraud: Bombay High Court
Case Title –Sh. Sai Annadhatha Polymers and Another Vs Canara Bank' represented by its Branch Manager, 2018 SC
"To sum up, the post-amended scenario inevitably requires a clear thirty day notice period being maintained between issuance of the sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of the Rules of 2002, as pointed out in MATHEW VARGHESE, stands extinguished upon publication of the sale notice under Rule 9(1)."
The law laid down by the Hon'ble Andhra Pradesh High Court in the authority (supra) was upheld by the Hon'ble Apex Court in the case of 'Celir LLP Vs Bafna Motors. (Mumbai) Private Limited and Others'.
It has been clearly mentioned in 'Sh. Sai Annadhatha Polymers and Another' (supra), that 30 days notice period which has to be maintained is between issuance of sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof.
Above Plea rejected: However, reference is made to order dated 25.04.2023 in the case of 'M/s RA Pure Life Science Limited and others Vs Indian Overseas Bank in SLP(C) Nos. 7593-7595/2023' wherein submission with regard to non- compliance and violation of Rule 8(6) read with Rule 9(1) of the Rules of 2002, was rejected on the ground that the petitioners had enough time and opportunity to make payment.
- Case Title – Mardia Chemicals Ltd. v. Union of India (2004)1: This was the first case that challenged the constitutional validity of the SARFAESI Act on various grounds, such as violation of Article 14, 19 and 21 of the Constitution, lack of opportunity of hearing, excessive delegation of powers, etc. The Supreme Court upheld the constitutionality of the Act, except for Section 17(2), which required the borrower to deposit 75% of the amount claimed by the bank before filing an appeal before the Debts Recovery Tribunal (DRT). The Court struck down this provision as arbitrary and unreasonable.
- Case Title –Transcore v. Union of India (2008)2: This case settled the controversy regarding the applicability of the SARFAESI Act to the debts which were already pending before the DRTs or the civil courts. The Supreme Court held that the SARFASEI Act is applicable to such debts, and the banks can invoke its provisions even if they have already initiated proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act) or the civil procedure code. The Court also clarified that the DRTs have the jurisdiction to decide the appeals against the measures taken by the banks under the SARFASEI Act, and the civil courts have no role to play in such matters.
- Case Title – United Bank of India v. Satyawati Tondon (2010)3: This case dealt with the scope of writ jurisdiction of the High Courts under Article 226 of the Constitution in matters relating to the SARFASEI Act. The Supreme Court held that the High Courts should not entertain writ petitions challenging the actions of the banks under the SARFASEI Act, unless there is a violation of fundamental rights or a lack of jurisdiction or authority on the part of the banks. The Court observed that the borrowers have an adequate alternative remedy of appeal before the DRTs and the DRATs, and the writ jurisdiction should be exercised sparingly and cautiously.
- Case Title – Kanaiyalal Lalchand Sachdev v. State of Maharashtra (2011)4: This case examined the interplay between the SARFASEI Act and the Maharashtra Rent Control Act, 1999, which protects the tenants from eviction by the landlords. The Supreme Court held that the SARFASEI Act prevails over the Rent Control Act, and the tenants cannot claim any protection from eviction by the banks, who acquire the rights of the landlords by taking possession of the secured assets under the SARFASEI Act. The Court also held that the tenants are not necessary or proper parties to the proceedings under the SARFASEI Act, and they cannot challenge the actions of the banks before the DRTs or the High Courts.
- Case Title – Harshad Govardhan Sondagar v. International Asset Reconstruction Co. Ltd. (2014)5: This case addressed the issue of whether the guarantors of the loans are covered by the definition of borrowers under the SARFASEI Act, and whether the banks can proceed against them under the Act. The Supreme Court held that the guarantors are included in the term borrowers, and the banks can take action against them under the SARFASEI Act, subject to the terms and conditions of the guarantee agreement. The Court also held that the guarantors have the right to challenge the actions of the banks before the DRTs under Section 17 of the Act.
- Case Title – THE AUTHORISED OFFICER CENTRAL BANK OF INDIA V. SHANMUGAVELU Citation : 2024 LiveLaw (SC) 85
SARFAESI Act is a special legislation with an overriding effect on the general law, and only those legislations which are either specifically mentioned in Section 37 or deal with securitization will apply in addition to the SARFAESI Act..Being so, the underlying principle envisaged under Section(s) 73 & 74 of the 1872 Act which is a general law will have no application, when it comes to the SARFAESI Act more particularly the forfeiture of earnest-money deposit which has been statutorily provided under Rule 9(5) of the SARFAESI Rules as a consequence of the auction purchaser's failure to deposit the balance amount.”
The Court relied on its recent judgment of Authorized Officer State Bank of India v. C. Natarajan, to explain the purpose of providing an overriding effect to SARFAESI over the Indian Contract Act.
“If indeed section 73 and section 74, which are part of the general law of contract, were sufficient to cater to the remedy, the need to make sub-rule (5) of rule 9 as part of the Rules might not have arisen. Additionally, insertion of sub-rule (5) with such specificity regarding forfeiture must not have been thought of only for reiterating what is already there. It was visualized by the law makers that there was a need to arrest cases of deceptive manipulation of prices at the instance of unscrupulous borrowers by thwarting sale processes and this was the trigger for insertion of such a provision with wide words conferring extensive powers of forfeiture. The purpose of such insertion must have also been aimed at instilling a sense of discipline in the intending purchasers while they proceed to participate in the auction-sale process. At the cost of repetition, it must not be forgotten that the SARFAESI Act was enacted because the general laws were not found to be workable and efficient enough to ensure liquidity of finances and flow of money essential for any healthy and growth-oriented economy.”
- Case Title – Shree Anandhkumar Mills vs Indian Overseas Bank & Ors
Civil Suit not maintainable where proceedings under SARFAESI Act has been initiatedIn this case of 2018, Hon’ble Supreme Court held that a suit for partition would not be maintainable in a situation where proceedings under the SARFAESI Act had been initiated. While arriving at its decision, the Apex Court made reference to the case of Jagdish Singh vs. Heeralal.
In the case it was also held that the remedy of any person aggrieved by the initiation of proceedings under the SARFAESI Act lies under Section 17 of SARFAESI Act which provides for an efficacious and adequate remedy to a party aggrieved.
- Case Title – ITC Limited v. Blue Coast Hotels Ltd. & Ors
Section 13(3A) of SARFAESI Act is a Mandatory Provision
In this recent case, the Two-Judge Bench of Hon’ble Supreme Court extensively dealt with the purported scheme of Section 13(3) of SARFAESI Act .The relevant provision is reproduced herein below:*[(3-A) If, on receipt of the notice under sub-section (2), the borrower makes any representation or raises any objection, the secured creditor shall consider such representation or objection and if the secured creditor comes to the conclusion that such representation or objection is not acceptable or tenable, he shall communicate within one week of receipt of such representation or objection the reasons for non-acceptance of the representation or objection to the borrower:
Provided that the reasons so communicated or the likely action of the secured creditor at the stage of communication of reasons shall not confer any right upon the borrower to prefer an application to the Debts Recovery Tribunal under Section 17 or the Court of District Judge underSection 17-A.
Hon’ble Supreme Court Bench in the case has held that the language of sub-section (3) is clearly impulsive. It states that the secured creditor "shall consider such representation or objection and further, if such representation or objection is not acceptable or tenable, he shall communicate the reasons for non-acceptance" thereof.
That the word 'shall' invariably raises a presumption that the particular provision is imperative.That further there is nothing in the legislative scheme of Section 13(3A) of SARFAESI Act which requires the Court to consider whether or not, the word 'shall' is to be treated as directory in the provision.
That as the Section stood originally, there was no provision for the above mentioned requirement of a debtor to make a representation or raise any objection to the notice issued by the creditor under Section 13(2).
That it could not be the intention of the Parliament for the provision to be futile and for the discretion to ignore the objection/representation and proceed to take measures, be left with the creditor. That a provision which requires reasons to be furnished must be considered as mandatory. Such a provision is an integral part of the duty to act fairly and reasonably and not fancifully.
That the provision under Section 13(3A) of SARFAESI Act must nonetheless be treated as mandatory.
- Agarwal Tracom Pvt. Ltd. v. Punjab National Bank
Auction Purchaser to Approach DRT before Invoking Writ Jurisdiction
In the case, PNB had given loan facility to a Company called "M/s India Iron & Steel Corporation Limited" (Borrower) for their business, which they were carrying in U.P. To secure the loan amount, the Borrower had secured their assets. The Borrower, however, failed to clear their loan amount and became a defaulter in its repayment. The PNB, therefore, invoked their powers under Section 13(4) of SARFAESI Act, 2002 (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act).
Section 13(4) of SARFAESI Act provides for the measures that can be taken by the secured creditor to recover his secured debt from the Borrower. The appellant's (auction purchaser) bid was accordingly accepted by the PNB. However, later on there was conflict between PNB and the auction purchaser due to non-compliance of memorandum of understanding between them. This led the PNB to forfeit the appellant's deposit to which the auction purchaser objected before the Single Judge of Allahabad High Court and then before the Division Bench of Allahabad High Court.
The High Court in the case dismissed the appellant's writ petition on the ground of availability of alternative statutory remedy to the appellant of filing the application before the Debt Recovery Tribunal (DRT) under Section 17 of SARFAEST Act. felt aggrieved, the auction purchaser approached Hon’ble Supreme Court.Section 17 of SARFAESI Act provides for the right to appeal. It enumerates that any person who is aggrieved by the measures referred to in Section 13(4) of SARFAESI Act shall make an application to the DRT within 45 days from the date on which measure had been taken.
The Appellant contended that in order to attract the rigor of Section 17 of SARFAESI Act it is necessary that the action complained of by the party concerned must satisfy the conditions set out in Section 13(4) of SARFAESI Act and that the "forfeiture of deposit" impugned in the writ petition is not and nor it could be considered as one of the measures falling in Section 13(4) of SARFAESI Act.The seminal issue with which Hon’ble Supreme Court was confronted in the case was:
Whether the High Court was justified in holding that the remedy of the auction purchaser lies in challenging the action of the secured creditor in forfeiting the deposit by filing an application under Section 17 of the SARFEASI Act before the DRT or the remedy of auction purchaser is in filing the writ petition under Article 226 of Constitution to examine the legality of such action?
Hon’ble Bench held:
• That Section 17 provides a remedy to a person who is aggrieved by the measures taken by the secured creditor or his authorized officer under Section 13(4) in relation to secured assets of the borrower. That an action of secured creditor in forfeiting the deposit made by the auction purchaser is a part of the measures taken by the secured creditor under.
• To decide the issue at hand, Hon’ble Supreme Court also made reference to Rules 8 and 9 of Security Interest (Enforcement) Rules, 2002. The Court stated that Section 17(2) of the Act empowers the Tribunal to examine all the issyes arising out of the measures taken under Section 13(4) including the measures taken by the secured creditor under Rules 8 and 9 for disposal of the secured assets of the borrower.
Rule 8 provides for sale of immovable secured asset and Rule 9 provides for time of sale, issue of sale certificate and delivery of possession of the immovable secured asset.
◦That expression "provisions of this Act and the Rules made thereunder" occurring in subsections (2), (3), (4) and (7) of Section 17 clearly suggests that it includes the action taken under Section 13(4) as well as the action taken under Rules 8 and 9 which deal with the completion of sale of the secured assets. In other words, the measures taken under Section 13(4) would not be completed unless the entire procedure laid down in Rules 8 and 9 for sale of secured assets is fully complied with by the secured creditor.
◦That Rule 9(5) confers express power on the secured creditor to forfeit the deposit made by the auction purchaser in case the auction purchaser commits any default in paying installment of sale money to the secured creditor. The Court opined that such action is a part of the measures specified in Section 13(4) and, therefore, it is regarded as a measure taken under Section 13(4)
That the auction purchaser is one such person, who is aggrieved by the action of the secured creditor in forfeiting their money and fell within the expression "any person" as specified under Section 17 and hence is entitled to challenge the action of the secured creditor i.e. PNB before the DRT by filing an application under Section 17 of the SARFAESI Act.
Writ Petition not to be preferred when alternative remedy was available.That it is a settled law that the High Court will ordinarily not entertain a petition under Article 226 of Constitution if an effective remedy is available to the aggrieved person. In all such cases, the High Court must insist that before availing remedy under Article 226 of Constitution, a person must exhaust the remedies available under the relevant statute.
That rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance.
In view of the aforesaid observations, Hon’ble Supreme Court dismissed the auction purchaser's writ petition on the ground of availability of alternative statutory remedy of filing an application under Section 17 of SARFAESI Act before the DRT to challenge the action of the PNB in forfeiting the appellant's deposit under Rule 9(5).
In the case, the auction purchaser was granted liberty to approach the concerned DRT under Section 17 of SARFAESI Act within 45 days from the date of the order.
In the case, Hon’ble Supreme Court has settled the law that not only the Borrower but even the auction purhaser can approach DRT under Section 17 of SARFAESI Act if he is aggrieved by any of the measures taken by the secured creditor under Section 13(4) of the Act.
Other authority which states the said legal principle is Supreme Court's observation in the case of United Bank of India v. Satyawat Tandon & Ors.  wherein the Court examined in detail the provisions of the SARFAESI Act andquestion regarding Invocation of the extraordinary power under Article 226 of Constitution in challenging the actions taken under the SARFAESI Act.
In the case, the Court stated that the expression "any person" used in Section 17(1) is of wide import. It takes within its fold, not only the borrower but also the guarantor or any other person who may be affected by the action taken under Section 13(4) or Section 14. Both, the Tribunal and the Appellate Tribunal are empowered to pass interim orders under Sections 17 and 18 and are required to decide the matters within a fixed time schedule.
- Case Title – Authorized Officer, State Bank of Travancore and Another v. Mathew K.C.
Article 226 can't be Invoked if Alternate Statutory Remedies are Available
In this recent case, Hon’ble Supreme Court has categorically stated to settled principles that:
• When a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation
• In financial matters grant of ex-parte interim orders can have a deleterious effect
In this case, the appeal challenged High Court's order staying further proceedings at the stage of Section 13(4) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ('SARFAESI Act'), on deposit of Rs.3,50,000/-within two weeks. An appeal against the same was dismissed by the Division Bench observing that counter affidavit having been filed, it would be open for the Appellant Bank to seek clarification/modification/variation of the interim order.
The Appellants in the case contended that the loan account of the Respondent was declared a Non-Performing Asset (NPA) and the outstanding dues of the Respondent on the date of the institution of the writ petition was Rs.41,82,560/-. Despite repeated notices, the Respondent failed to pay the dues. Accordingly statutory notice under Section 13(2) of the SARFAESI Act was issued to the Respondent. Thereafter, Possession notice was then issued under Section 13(4) of the SARFAESI Act.
Hon’ble Supreme Court's Two-Judge Bench while allowing the appeal made following notable observations pertaining to SARFAESI Act:
• That the SARFAESI Act is a complete code by itself, providing for expeditious recovery of dues arising out of loans granted by financial institutions, the remedy of appeal by the aggrieved under Section 17 (right to appeal) before the Debt Recovery Tribunal, followed by a right to appeal before the Appellate Tribunal under Section 18.
• That the High Court ought not to have entertained the writ petition in view of the adequate alternate statutory remedies available to the Respondent. The interim order was passed on the very first date, without an opportunity to the Appellant to file a reply. The writ petition ought to have been dismissed at the threshold on the ground of maintainability.
• That the discretionary jurisdiction under Article 226 is not absolute but has to be exercised judiciously in the given facts of a case and in accordance with law. The normal rule is that a writ petition under Article 226 of the Constitution ought not to be entertained if alternate statutory remedies are available, except in cases falling within the well-defined exceptions as observed in Commissioner of Income Tax and Others vs. Chhabil Dass Agarwal. In this case, the Apex Court held that:
Thus, while it can be said that this Court has recognized some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles of natural justice... the High Court will not entertain a petition under Article 226 of the Constitution if an effective alternative remedy is available to the aggrieved person. Therefore, when a statutory forum is created by law for redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.
• With reference to the instant case, Hon’ble Supreme Court noted that the grievances did not fall within any of the exceptions as enumerated by the Apex Court in Chhabil Das case.
• The Court in the case also took the opportunity to expound the object of the SARFAESI Act as under:
That the banking and financial sector in the country was felt not to have a level playing field in comparison to other participants in the financial markets in the world. The financial institutions in India did not have the power to take possession of securities and sell them. The existing legal framework relating to commercial transactions had not kept pace with changing commercial practices and financial sector reforms resulting in tardy recovery of defaulting loans and mounting non-performing assets of banks and financial institutions. The Narasimhan Committee I and Il as also the Andhyarufina Committee constituted by the Central Government Act had suggested enactment of new legislation for securitisation and empowering banks and financial 8 institutions to take possession of securities and sell them without court intervention which would enable them to realise long term assets, manage problems of liquidity, asset liability mismatches and improve recovery. The proceedings under the Recovery of Debts due to Banks and Financial Institutions Act, 1993, (hereinafter referred to as the DRT Act) with passage of time, had become synonymous with those before regular courts affecting expeditious adjudication. All these aspects have not been kept in mind and considered before passing the impugned order.
• That in financial matters grant of ex-parte interim orders can have a deleterlous effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order.
That Loans by financial institutions are granted from public money generated at the tax payer's expense. Such loan does not become the property of the person taking the loan, but retains its character of public money given in a fiduciary capacity as entrustment by the public. Timely repayment also ensures liquidity to facilitate loan to another in need, by circulation of the money and cannot be permittedko be blocked by frivolous litigation by those who can afford the luxury of the same.
- Case Title –Dr. Dipankar Chakraborty vs Allahabad Bank & Ors
Notice by Bank under SARFAESI Act is Subject to Provisions of the Limitation Act
In a recent ruling passed by the Calcutta High Court on July 07, 2017, the Court has stated that provision of notice by secured creditor (in this case the Bank) under Section 13(2) of the SARFAESI(Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act,2000 (hereinafter the Act) to the borrower (in this case the Petitioner) is subject to the adherence of the provisions of Limitation Act, 1963.
Section 13(2) of the SARFAESI Act provides that the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to initiate measure for recovery of debt in the manner mentioned in the Act.
Section 36 of the SARFAESI Act provides that a secured creditor shall not be entitled to initíate measures for recovery under the Act against the borrower if he does not lodge his claim in respect of the financial asset within the period of limitation as provided in the Limitation Act.
The Law relating to the Bar of Limitation provides that once the loan has been secured by mortgage or by creating a charge on immovable property in question, the provisions of Article 62 of the Schedule appended to the Limitation Act would apply which provides a period of 12 years from the date when the money becomes due (Raj Rani & Anr. v. Oriental Bank of Commerce)
Factual Matrix in the case: The Petitioner in the case had availed credit facilities from the Bank.Later on, the Bank filed a proceeding under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 against the petitioner before the Debts Recovery Tribunal, Kolkata.
Thereafter, the Bank issued the notice to Petitioner under Section 13(2) of the SARFAEST Act. The Petitioner in the instant case has challenged the impugned notice of the Bank and alleged that same is barred by the provisions of Limitation Act as mentioned under Section 36 of SARFAESI Act.
Petitioner's case- The Petitioner alleged that the Bank wrongfully proceeded under the SARFASI
Act as on the date of issuance of the notice under Section 13(2) of the SARFAESI Act, the claim of the bank was barred by the laws of limitation according to Section 36 of the Act which provides that no secured creditor shall be entitled to take all or any of the measures for recovery of debt as mentioned under Section 13(4), unless his claim in respect of the financial asset is made within the period of limitation prescribed y under the Limitation Act .
Petitioner further submitted that the claim of the Bank has to be within the period of limitation at the time of initiation of the proceedings under the SARFAESI Act. He contended that mortgage of
Important Judgments on SARFAESI Act the immovable property in the subject was created in 1995. In terms of the provisions of the Limitation Act, 1963, a suit for mortgage could have been instituted by 2007. Moreover, the last installment in respect of the loan account was paid by the Petitioner in October 199 and taking th same into consideration the notice under the provisions of the SARFAESI Act cannot be said to be within the period of limitation.
Submission by the Bank- The Defendant Bank claimed that impugned notice to the Plaintiff was within the period of limitation and that the period of limitation had stopped on the date when the Bank had filed the proceedings under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act, 1993 in 2001. That the proceedings under Section 19 of the Act of 1993 are yet to attain finality and once such proceedings culminate into a certificate, the Bank would have a period of 12 years to execute such certificate.
Court's Ruling in the case:
Bank's claim barred by the provisions of Limitation Act- The Court stated that under ordinary law, the Bank had lost the remedy to recover debt from the Petitioner by way of mortgage as the limitation of 12 years as provided in Article 62 of the Schedule to the Limitation Act, 1963 had expired. The Court further stated that the secured creditor's right to invoke remedy under SARFAESI Act is independent of and despite the pendency of the proceedings under the Act of 1993 and the remedy has to be looked at from the perspective of whether or not such an action meets the requirement of Section 36 of the Act of 2002. Hence, right to proceed is subject to the adherence to the provisions of limitation as enshrined in the Limitation Act, 1963.
The Court further opined that the view of the facts of the present case, the secured creditor could not have issued a notice under Section 13(2) the SARFAESI Act on July 5, 2011, as the same was barred by limitation on such date. The time to file a suit for recovery of money had expired in 2001 itself.
Limitation of proceedings under Section 19 of Recovery of Debts Due to Banks and Financial Institutions Act- The Court held that the issue of limitation of the proceedings under Act of 1993 is an issue which should be decided by the Debts Recovery Tribunal before which the said proceedings were pending.
The Court's order in detail can be accessed here.
- United Bank of India & Anr. v. State of West Bengal
Secured Creditor cannot Invoke Section 14 of SARFAESI Act after Sale of Secured Asset
In a recent order, the High Court of Calcutta has held that a secured creditor is not entitled to invoke the provisions of Section 14 of SARFAESI Act (District Magistrate to assist secured creditor in taking possession of secured asset) pursuant to the sale of an immovable property over which it claims a security interest.
In the case, the Petitioner had sought direction from the concerned District Magistrate to consider and dispose of application made by the Petitioner under Section 14 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
Section 14 of the SARFAESI Act provides for District Magistrate to assist secured creditor in taking possession of secured asset. The Petitioner contends that even though the sale of immovable property in the case had taken place, the said application had not yet been considered by the Magistrate. Thus, the Petitioner in the case prayed for an expeditious disposal of its application under Section 14.
The Petitioner contended that under Section 14 of the SARFAESI Act a secured creditor is entitled to sale or transfer of an immovable property. The Petitioner further contended that the legislature had used such two words i.e. sale and transfer for different purposes and that sale and transfer are not synonymous.
That the term "transfer" in Section 14 is used for the purpose of allowing the secured creditor to pass or hand over possession of the property to third party. Therefore, even if the secured creditor had sold the property, for the purpose of transferring possession of such property, a secured creditor is entitled to invoke Section 14 of SARFAESI Act.
State's Reply in the case
The State of West Bengal (Respondent) conteded in the case that the moment the secured creditor sells an immovable property, it ceases to have any security interest in such secured asset and hence such secured creditor should not be permitted to invoke the provisions of SARFAESI Act.
Issue in the case- Whether a secured creditor is entitled to invoke the provisions of Section 14 of SARFAESI Act subsequent to the sale of an immovable property over which it claims security interest?
In order to decide the issue, the Calcutta High Court made reference to Supreme Court's decision in the case of Suraj Lamp & Industries Private Limited (2) v. State of Haryana & Anr.  wherein the Court held that the words 'sale and 'transfer used in Section 14 of the Act of 2002.
wherein the Court held that the words 'sale and 'transfer used in Section 14 of the Act of 2002 are not synonymous. The word 'transfer' used as a verb means that, a person is conveying or removing from one place or one person to another or is passing or handing over something to another person. It can also mean changeover of the possession or control of a given thing.
Transfer is, therefore, wider than sale. As noted above, it may include an element of making over of possession. The word 'transfer' used in Section 14, therefore, can mean making over of possession of an immovable property. It is contended by the petitioners that, since the word
'transfer used in Section 14 of the Act of 2002 includes an act of making over of possession, the petitioner as the secured creditor can legitimately invoke Section 14 of the Act of 2002 even after a conveyance in respect of an immovable property sold, has been executed and registered. With respect, this contention of the petitioner overlooks the fact that, the right, title and interest of the secured creditor and the vendor stands transferred to and vested with the purchaser upon the execution and registration of the deed of conveyance which is otherwise duly stamped. On and from the date of such document, the secured creditor ceases to have any interest in respect of the immovable property concerned. Therefore, the secured creditor does not retain any further right to meddle with the immovable property under the provisions of the Act of 2002 in order to invoke Section 14 of the Act of 2002 for the purpose of possession or otherwise.
In the case, the Court dismissed the Petitioner's prayer and held that the plea that the secured creditor retains the right to obtain possession of the immovable property, even after execution and registration of the deed of conveyance in favour of the purchaser is misplaced. The Court further held that the transfer of immovable property by way of a sale can be done by a deed of conveyance duly executed, stamped and registered under the Registration Act, 1860.
These are some of the important judgments on the SARFAESI Act that have clarified its scope and application. There are many other judgments that have dealt with various aspects and issues of the Act, such as the valuation of the secured assets, the rights of the secured creditors, the role of the Chief Metropolitan Magistrate or the District Magistrate, the procedure for sale of the secured assets, etc. The SARFASEI Act is a dynamic and evolving law that aims to balance the interests of the banks and the borrowers, and to facilitate the speedy recovery of the debts.