Page 15 - BANKING FINANCE JUNE 2016

LEGAL UPDATE
Borrower can opt
Sarfaesi suits if 50% of
the due is paid
A borrower can file an appeal against
the Debt Recov-
ery Tribunal (DRT)
before the appel-
late tribunal only had died, his grandchildren were also made parties by the tribunal. They chal-
if he deposits 50
per cent of the
due amount or 50
per cent ordered by the DRT, which-
ever is less, is the rule under the
Securitisation and Reconstruction of
Financial Assets and Enforcement of
Security Interest (Sarfaesi) Act. The
appellate tribunal may reduce the
amount to 25 per cent.
The Supreme Court ruled that the
amount is deposited by the borrower
with the tribunal and not the credi-
tor and it is not bailment. In the Axis
Bank versus SBS Organic case, the
borrower sought the return of the
pre-deposit after the disposal of the
suit. But the bank opposed it and
claimed it on the ground that the
amount had to be set off against the
dues of the borrower. The bank con-
tended that it has to secure the en-
tire debt by proceeding against the
secured assets, and therefore, the
deposit is liable to be appropriated
by the bank.
Rejecting the arguments of the
bank, the judgment stated that the
Act permitted the secured creditor
to proceed only against the secured
assets. The pre-deposit as a condi-
tion is neither a secured asset nor a
secured debt, since the borrower
has not created any security interest
on such pre-deposit in favour of the
secured creditor. The bank has no lien
on the amount either, the judgment
said, ordering the return of the pre-
deposit.
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Grand children cannot be pursued for loan
The debt recovery tribunal and the appellate tribunal "misdirected themselves"
by pursuing the grandchildren of a guarantor when there
was no evidence that they had inherited the estate of
the guarantor, the Delhi High Court stated in the case,
Rohini Kanoi vs Allahabad Bank. In this case, a firm took
loan from Allahabad Bank which was not repaid.
The bank took the firm and the guarantors to the tribunal. Since one guarantor
lenged their impleadment, that too after ten years. The high court stated that
the tribunal could not make the grandchildren suffer the trial on a "bald asser-
tion", after a long delay, that the bank had learnt that they had inherited the
estate of the guarantor.
HDFC found guilty for harassment
The Consumer Commission has directed HDFC Ltd to compensate a woman for
harassment by putting up her house for auction with-
out providing her details of the arrears due in the
home loan. When her estranged husband stopped in-
stallments, she offered to pay instead; but the com-
pany would not disclose the amount to her for three
years and proceeded to auction her Mumbai house.
The Delhi consumer forum held the company guilty of deficiency in service and
abuse of dominant position in the case, Shalima vs HDFC Ltd. The company
appealed to the commission. It upheld the finding of guilt.
Shocking auction of a mortgage property
The Supreme Court remarked that it was "quite shocking" that a bank auctioned
a mortgaged property with a floor price of Rs 42 lakh for
Rs 5.5 lakh. Since the sale was full of irregularities, the
bank was directed to return the money to the auction
purchaser with eight per cent interest from the sale in
1998. In this case, Olinda Femandis versus Goa State Co-
operative Bank Ltd, the property belonged to seven mem-
bers of a family.
Three of them signed a mortgage deed for Rs 2 lakh, while others did not con-
sent. The bank, nevertheless, sanctioned the loan. It was not returned, leading
to the auction. The court set aside the auction and made arrangement to help
one of the owners, who had opposed the mortgage.
Land acquisition quashed for delay
The Supreme Court quashed the land acquisition notification of the Punjab gov-
ernment because the land was not taken possession by the authorities for more
than five years. According to Section 24(2) of the Right to Fair Compensation
and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act,
2013, if the land is not taken over within the five-year period, or compensation
is not paid within that time, the notification will lapse.
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