DRT Recovery Certificate Confers Financial Creditor Status And Gives Rise To Fresh Cause Of Action: NCLAT Chennai

The company appeals were filed by the personal guarantors of the corporate debtor, challenging the order admitting the Insolvency Resolution Process (IRP) against them u/s 95 of the IBC, 2016. The issues before the Ld. NCLAT were whether the demand notice was properly served and whether the initiation of the proceedings was barred by the limitation. Background of the Case The corporate debtor availed the loan facility from the financial creditor and the appellants were the...

Writ Jurisdiction Cannot Be Invoked When Party Has Already Approached DRT Under SARFAESI Act: Delhi High Court

The Delhi High Court has dismissed a petition while upholding that if a borrower has already approached the Debt Recovery Tribunal (DRT) under the SARFAESI Act, for a one-time settlement, a writ seeking the same relief under Article 226 of the Constitution is not maintainable. Background of the Case The petitioner has availed the credit facilities from the consortium of banks, i.e., Punjab National Bank, Indian Bank, and UCO Bank. Later on, the account of the petitioner was declared...

S. 11 SARFAESI Act | DRT Can't Decide Disputes Between Banks Over Secured Assets; Must Be Referred To Arbitration : Supreme Court

In a significant ruling under the SARFAESI Act, 2002 (“Act”), the Supreme Court today (May 23) held that inter-creditor disputes (between secured creditors) must be resolved through arbitration under Section 11 of the Act read with the Arbitration & Conciliation Act, 1996 (“Arbitration Act”). Unlike the Arbitration and Conciliation Act, which requires a written agreement for reference, Section 11 of the Act creates a statutory mandate for arbitration, eliminating the need for any such...

Order Of DRT Setting Aside NPA Classification Does Not Negate Existence Of Financial Debt Or Occurrence Of Default: NCLT Delhi

The National Company Law Tribunal (NCLT), New Delhi bench of Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Dr. Sanjeev Ranjan (Technical Member), held that an order of Debt Recovery Tribunal (DRT) setting aside NPA classification does not negate existence of financial debt or occurrence of default, which are the two primary factors for admitting a Section 7 petition under the Insolvency & Bankruptcy Code (“the code”) . Background Facts: The Applicant, M/S Encore ...

Initiation Of Recovery Proceedings Before DRT Does Not Preclude Financial Creditor From Filing Application U/S 7 Of IBC: NCLAT

The NCLAT New Delhi bench of Justice Ashok Bhushan (Judicial Member), Mr. Barun Mitra (Technical Member) and Mr. Arun Baroka (Technical Member) has held that initiation of recovery proceedings before the DRT does not prohibit financial creditors from filing an application under section 7 of the code. Brief Facts: The present appeal has been filed by suspended director of the corporate debtor against an order passed by the Adjudicating Authority by which an application under section 7...

Unjustified For Bank To Proceed Against Property Based On Prior Settled Mortgage, When No New Mortgage Was Created: Kerala High Court

The Kerala High Court has observed that it was not appropriate to proceed against the property of a guarantor who has not created mortgage over the property as collateral, merely because the guarantor had previously acted as a surety in another mortgage that has already been settled.In the case before the high court, the petitioner company mortgaged its property to avail itself of a credit facility for an LLP, and that mortgage was settled, and dues were cleared, but the bank did not return its...

Proceedings Under SARFAESI Act And RDDB Act Are Complimentary, Can Continue Parallelly: Delhi High Court

The High Court of Delhi has held that proceedings under SARFAESI Act and RDDB Act are complimentary to each other and both the proceedings can continue parallelly. The bench of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora held that since both the proceedings are complimentary, there would be no application of principle of election of remedies and the secured creditor can avail both the remedies together. Facts The Petitioner availed a loan for an amount...

Debt Recovery | Extension Of Interim Relief At The Time Of Remand Subject To Prima Facie Finding In Petitioner's Favor: Delhi High Court

A Division Bench of the Delhi High Court recently held that an interim order granted by the Debts Recovery Appellate Tribunal ("DRAT") during the pendency of appeal was not required to be extended in pursuance of remand, without a prima facie finding on the need for such an order. The Bench, comprising Justices Vibhu Bakhru and Amit Mahajan, dismissed the present writ petition and dispelled petitioner-Deco’s contention that the interim order in its favor ought to have been...

Supreme Court Affirms Mandatory E-Filing In DRTs & DRATs, Says Other Courts Should Replicate It

In a plea filed by the Madhya Pradesh High Court Bar Association, the Supreme Court affirmed mandatory e-filing in Debts Recovery Tribunals (DRTs) and Debts Recovery Appellate Tribunals (DRATs). The court, while remarking that other Courts and Tribunals should also replicate the model of mandatory e-filing, also passed certain directions to make e-filing more accessible for everyone. The bench comprising CJI DY Chandrachud, Justice PS Narasimha, and Justice JB Pardiwala, through its...

Though Borrower Can File Civil Suit Despite The Remedy Of Counter Claim In DRT, In Light Of Section 8 Of The A&C Act, Bombay High Court Refers The Parties To Arbitration

The Bombay High Court has reiterated that the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act) bars the jurisdiction of the Civil Court only in respect of the applications filed by banks/ financial institutions for recovery of debt, however, it does not bar the jurisdiction of the Civil Court to try a suit filed by the borrower. The bench of Justice Bharati Dangre remarked that even though a remedy is available to the borrower to file a counterclaim in the application filed by the...

Determination Of Debt/ Adjudication Of Liability, Under SARFAESI, No Need To Refer To Arbitration: Delhi High Court

The Delhi High Court has ruled that the provisions of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDB Act) or the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) do not lay down an omnibus bar to arbitration. In each case, the Court would have to consider the nature of the dispute and determine whether the said statutes require the dispute to be tried exclusively by the Debt Recovery Tribunals...

Borrower Has To Pre-deposit 50% Of Which Amount In Appeal Before DRAT U/S 18 SARFAESI Act? Supreme Court Explains

While calculating the amount to be deposited as predeposit under Section 18 of the SARFAESI Act, 50% of which amount the borrower is required to deposit as pre-deposit? The Supreme Court has explained in a judgment delivered on Thursday (5 Jan 2023).The bench of Justices M R Shah and B V Nagarathna held as follows:Whatever amount is mentioned in the notice under Section 13(2) of the SARFAESI Act, in case steps taken under Section 13(2)/13(4) against the secured assets are under challenge before...