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WHETHER A SECURED CREDITOR HAS A LIEN ON THE DEPOSIT MADE FOR FILING APPEAL BEFORE DEBTS RECOVERY APPELLATE TRIBUNAL UNDER SECTION 18 OF SARFAESI ACT 2002

Other Topics - By: - Mr. M. GOVINDARAJAN - Dated:- 16-7-2016 - The Scheme of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) was intended to facilitate easy and faster recovery of loans advanced by banks and financial institutions. The ordinary recovery mechanism contemplated in the Code of Civil Procedure, 1908 was not considered sufficient. Thus the Recovery of Debts due to Banks and Financial Institutions Act, 1993 was introduced .....

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assets, in case the borrower fails to discharge his liability in full within the period specified notice issued under Section 13(2) of the Act. Section 13(3) of the Act mandates that the notice issued under Section 13(2) should contain details of the amount payable by the borrower and also the secured assets intended to be enforced by the secured creditor in the event of nonpayment of the dues as per Section 13(2) notice. Thus, the secured creditor is entitled to proceed only against the secured .....

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Right to Appeal the liberty granted to the aggrieved person is to make an application to the DRT and the parties are at a liberty to lead evidence before the Tribunal. It is actually a trial before the DRT on the grievances of the aggrieved persons in respect of the measures taken by the secured creditor for recovery of dues of the borrower in proceedings against the secured assets. Any person aggrieved by the order of the DRT under Section 17 of the Act, is entitled to prefer an appeal along w .....

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al is the question and whether the secured creditor has the lien on such deposit amount. The given below case law gives the answer for the same. In Axis Bank V. SBS Organics (P) Limited and another - (2016 (4) TMI 917 - SUPREME COURT) the first respondent in this case is a borrower. Since he was aggrieved by the steps taken by the secured creditor filed Securitization Application before Debt Recovery Tribunal, Ahmadabad. Interim relief was granted by DRT but the same was vacated. The first respo .....

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nd of deposit of ₹ 50 lakhs. Permission was granted, however, making it subject to the disposal of the appeal. The first respondent withdrew the appeal but moved the High Court of Gujarat aggrieved by the observation that the withdrawal would be subject to the result of the appeal. The Single Judge set aside the condition and permitted the first respondent to withdraw the amount unconditionally. Aggrieved by this the bank filed an intra-court appeal which was dismissed by a Division Bench. .....

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t the secured assets and therefore the deposit is liable to be appropriated by the bank; The bank has a lien on the amount under Section 171 of the Indian Contract Act, 1872. The Supreme Court analyzed the provisions of the Act. The appeal under Section18 of the Act is permissible only against the order by the DRT under Section 17. Under Section 17, the scope of the inquiry is limited to the steps taken under Section 13(4) against the secured assets. The partial deposit before the DRAT as a prec .....

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