Court denies assignee bank benefit of SARFAESI Act

By Babu Sivaprakasam, Deep Roy and Megha Agarwal, Economic Laws Practice
0
3413
LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link

The assignment of debt by banks and other financial institutions has become quite common. Bombay High Court recently adjudicated upon an interesting aspect of law in relation to one such assignment in the case of Kotak Mahindra Bank Ltd v Trupti Sanjay Mehta and Others.

Facts of the case

Babu_Sivaprakasam_-_Economic_Laws_Practice
Babu Sivaprakasam

In this case, a non-banking financial company (NBFC) had sanctioned a loan to an entity that defaulted in meeting its payment obligations in relation to the loan. Upon the default, the NBFC invoked the arbitration clause in the financing document and the arbitral tribunal ordered the borrower to repay the loan to the NBFC in accordance with the terms stipulated. The NBFC subsequently assigned the debt to a bank via a deed of assignment. The assignee invoked the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), to recover the outstanding amount and took possession of the flat which was provided as security for the loan.

Deep_Roy_-_Economic_Laws_Practice_2014_new
Deep Roy

The borrower filed an application before the Debt Recovery Tribunal, claiming that since the original lender (i.e. the NBFC) was not entitled to invoke the provisions of the SARFAESI Act, the assignee bank was also not entitled to take action under the act. The tribunal allowed the application and directed the bank to hand over possession of the flat. The bank filed an application before the Debt Recovery Appellate Tribunal, which was dismissed. Accordingly, the bank filed a writ petition before Bombay High Court.

You must be a subscribersubscribersubscribersubscriber to read this content, please subscribesubscribesubscribesubscribe today.

For group subscribers, please click here to access.
Interested in group subscription? Please contact us.

你需要登录去解锁本文内容。欢迎注册账号。如果想阅读月刊所有文章,欢迎成为我们的订阅会员成为我们的订阅会员

已有集团订阅,可点击此处继续浏览。
如对集团订阅感兴趣,请联络我们

Babu Sivaprakasam is a partner, Deep Roy is an associate partner and Megha Agarwal is an associate at Economic Laws Practice. This article is intended for informational purposes and does not constitute a legal opinion or advice.

109 A Wing, Dalamal Towers Free Press Journal Road Nariman Point, Mumbai – 400 021, India Tel: +91 22 6636 7000 Fax: +91 22 6636 7172 Email:BabuSivaprakasam@elp-in.com DeepRoy@elp-in.com Mumbai | New Delhi | Ahmedabad | Pune | Bengaluru | Chennai 109 A Wing, Dalamal Towers
Free Press Journal Road
Nariman Point, Mumbai – 400 021, India
Tel: +91 22 6636 7000
Fax: +91 22 6636 7172
Email:BabuSivaprakasam@elp-in.com
DeepRoy@elp-in.com
Mumbai | New Delhi | Ahmedabad | Pune | Bengaluru | Chennai

LinkedIn
Facebook
Twitter
Whatsapp
Telegram
Copy link