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2016 (12) TMI 1561 - MADHYA PRADESH HIGH COURT

2016 (12) TMI 1561 - MADHYA PRADESH HIGH COURT - TMI - Recovery of the debt - jurisdiction of the Recovery Officer - recovery of the amount by execution of the certificate - Held that:- It is not the intendment of the Act that while the basic liability of the defendant is to be decided by the Tribunal under Section 17, the Banks/Financial institutions should go to the Civil Court or the Company court or some other authority outside the Act for the actual realisation of the amount. The certificat .....

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sidering the aforesaid, we are unable to agree with the contention of the learned Senior Counsel for the appellants that the Bank has a lien over the surplus amount of ₹ 29,80,150.80/-. The writ court has rightly directed the appellant - Bank to refund the amount to the respondent No.1 along with interest. No case to interfere with the order dated 27/07/2016, passed by the learned writ court, as prayed is made out. - Also gone through the application for contempt filed by the responden .....

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nd Virender Singh, JJ. For the Appellants : A.S. Kutumble, Abhinav P. Dhanodkar (Learned Counsel) For the Respondents : Abhishek Tugnawat, Learned Counsel ORDER They are heard. By this writ appeal, the appellants - Banks are praying for setting aside of order dated 27/07/2016, passed in W.P. No.4969/2012 whereby the learned writ court directed the appellants to refund the amount of ₹ 29,80,150.80/- to the respondents alongwith interest at the same rate which the Bank is charging from its b .....

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Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short .... "the SARFAESI Act") and, therefore, the auction took place on 11/02/2010 and the property of the respondent No.1 (guarantor) was sold by the appellants - Bank for a sum of ₹ 82,21,551/-. The total outstanding dues in respect of M/s Mayunk Industries were ₹ 52,30,101/-. An appeal was preferred before the DRT and the same was dismissed on 30/09/2011. 3. The grievance of the respo .....

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ted the amount due i.e., ₹ 52,30,101/-. In respect of surplus amount, the stand of the Bank is that the respondent No.1 is proprietor of M/s Anita Steel Wire Works and in the account of M/s. Anita Steel Wire Works there are outstanding dues to the tune of ₹ 26,48,571/- and the surplus amount which was received by selling the property of respondent No.1 has been adjusted in respect of outstanding dues of M/s. Anita Steel Wire Works. 5. The stand of the Bank that they are having genera .....

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ly in respect of account of M/s. Mayunk Industries, there was a separate contract between the Bank and M/s. Mayunk Industries and the respondent No.1 was guarantor in respect of loan granted M/s. Mayunk Industries. There were two separate account altogether and by no stretch of imagination, the surplus amount by taking the shelter of Section 171 of the Indian Contract could have been appropriated with the outstanding amount of M/s. Anita Steel Wire Works and directed the Bank to refund the amoun .....

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ent has drawn our attention to Section 171 of the Indian Contract Act, 1872 and Section 2(7) of the Sale of Goods Act, 1930 and submitted that the surplus amount cannot be appropriated. Section 171 of the Indian Contract Act and Section 2(7) of The Sales of Goods Act, 1930 reads as under :- Section 171 of the Indian Contract Act: 171. General lien of bankers, factors, wharfingers, attorneys and policy-brokers.- Bankers, factors, wharfingers, attorneys of a High Court and policy-brokers may, in t .....

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to or forming part of the land which are agreed to be severed before sale or under the contract of sale; 9. Learned counsel for the respondent No.1 also submitted that as per Section 171 of the Indian Contract Act, 1872, in mercantile system the Bank has a general lien over all forms of securities in respect of goods bailed to them. He submitted that as per Sub-section 7 of Section 2, the actionable claims and the surplus amount are not goods within the meaning of Section 2(7) of the Sale of Goo .....

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, The Central Excise Act, 1944, The Consumer Protection Act, 1986, The Motor Vehicles Act, 1988, etc. However, unlike those statutes, the purpose of the SARFAESI Act is different, it is meant only for speedy recovery of the dues, and the scheme under Section 13(4) of the Act, permits the secured creditor to proceed only against the secured assets. Of course, the secured creditor is free to proceed against the guarantors and the pledged assets, notwithstanding the steps under Section 13(4) and wi .....

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ed to the steps taken under Section 13(4) against the secured assets. The partial deposit before the DRAT as a pre-condition for considering the appeal on merits in terms of Section 18 of the Act, is not a secured asset. It is not a secured debt either, since the borrower or the aggrieved person has not created any security interest on such pre- deposit in favour of the secured creditor. If that be so, on disposal of the appeal, either on merits or on withdrawal, or on being rendered infructuous .....

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the Act read with Rule 11 of The Security Interest (Enforcement) Rules, 2002, or if there be any attachment in any other proceedings known to law. 23. We are also unable to agree with the contention that the Bank has a lien on the pre- deposit made under Section 18 of the SARFAESI Act in terms of Section 171 of The Indian Contract Act, 1872. Section 171 of The Indian Contract Act, 1872 on general lien, is in a different context: "171. General lien of bankers, factors, wharfingers, attorney .....

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of security for the general balance of account. The pre-deposit made by a borrower for the purpose of entertaining the appeal under Section 18 of the Act is not with the bank but with the Tribunal. It is not a bailment with the bank as provided under Section 148 of The Indian Contract Act, 1872. Conceptually, it should be an argument available to the depositor, since the goods bailed are to be returned or otherwise disposed of, after the purpose is accomplished as per the directions of the bailo .....

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