Page 16 - Banking Finance September 2023

LEGAL UPDATE

ment is made is not entitled to seek payment of the amount along with title deed of the same to the borrower. The
mentioned is the line of enquiry. The scope of banker's pro- borrower had deposited only half of the total outstanding
tection under Section 131, NI Act was also elaborated upon, amount with the bank and sought for quashing of the auc-
with reference to several precedents and judgments on the tion-sale in handing over the property back to him. Refer-
said aspect. The banker was stated to be acting in good faith ring to the amended provisions of Section 13(8) of the
and without negligence, in view of the statutory duty SARFAESI Act, it was held that the secured asset cannot be
enjoined by Sections 131 and 131-A of the NI Act. The sold or transferred by the secured creditor if outstanding
agent Ruksana was not treated to be "holder in due amount is paid by the borrower prior to the issuance of
course", since she adopted possession of the owner under auction notice.
lawful possession by means of an offence of fraud or mis-
Admittedly in the present case, since the borrower did not
representation.
deposit, nor was he ready to deposit the entire amount of
She was just a carrier for the purposes of change of details dues with the secured creditor, he had no right to redeem
in the KVP. Reference was also made to Government Sav- the mortgaged property, secured in favour of the bank.
ings Certificate Act 1959, pertaining to the transfer of NI. Thus, the directions of the High Court were contrary to the
It was further held that no payment of the claimed amount mandate of amended provisions to Section 13(8) of the
could have been made through cash but could have been SARFAESI Act.
made only through cheque. The provisions of Rules 14 and
It was further held that until and unless the borrower is
15 of the KVP Rules, 1988 were referred to hold that the
ready and willing to deposit the entire amount along with
post office was responsible for any loss caused to the holder
the entire costs and expenses with the bank/secured credi-
by the fraud played by any person towards its encashment.
tor, no order could be passed of handing over the property
In the process of encashment of the KVP, there was gross
back in his favour or compelling the bank to settle the out-
violation of various statutory provisions, especially the fraud
standing amount at a much lesser value. Accordingly, the
played in the process.
judgment of the High Court was set aside.
The employee of the bank, Mr M.K. Singh was also held to
have acted irresponsibly and carelessly in disregard of the
Union Bank of India v. Rajasthan Real
applicable procedure and provisions of KVP Rules, 1988. For
Estate Regulatory Authority
all the aforesaid reasons, it was held that the post office
was vicariously responsible for the fraud perpetrated by its (Delivered on February 14, 2022)
employees and thus compensation of the claimed amount
Coram: 2-Judge Bench HM Justices M.R. Shah and B.V.
along with interest and various heads were awarded to the
Nagarathna
petitioner claimant, setting aside the order of NCDRC.
Authored by: HM Justice M.R. Shah

Bank of Baroda v. Karwa Trading Co. The Court held that in the event of conflict between RERA
and SARFAESI Act, the provisions contained in RERA would
(Delivered on February 10, 2022)
prevail. RERA would not apply in relation to transactions
Coram: 2-Judge Bench HM Justices M.R. Shah and Sanjiv
between the borrower and the banks/financial institutions
Khanna
where security interest has been created by mortgaging the
Authored by: HM Justice M.R. Shah property prior to the introduction of the Act unless and until
the same is found to be fraudulent or collusive.
Appeal before the Supreme Court was preferred against the
order of Rajasthan High Court, through which direction was RERA shall have the jurisdiction to entertain a complaint
issued to the borrower to deposit a part of outstanding under RERA Act by any aggrieved person against the bank
amount to the bank, which was accordingly directed to as a secured creditor if the bank resorts to Section 13(4) or
release the property and hand over physical possession any incidental provision under the SARFAESI Act.

16 | 2023 | SEPTEMBER | BANKING FINANCE