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    Bank of Baroda V/s M/s Karwa Trading Company & Anr.

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    Anwar B
    This case involved a dispute between a bank (creditor) and a trading company (borrower) under the SARFAESI Act of 2002. The borrower had taken a loan of Rs. 1.95 crore but defaulted, and the bank initiated auction proceedings to recover the amount owed. The borrower challenged this in court, arguing it had the right to retain the property by depositing the auction's base price. The higher courts agreed but the Supreme Court overturned this, finding that allowing retention for anything less than full repayment violated the SARFAESI Act. The ruling reinforced that the Act aims to allow swift recovery of bad debts for creditors.

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    Bank of Baroda V/s M/s Karwa Trading Company & Anr.

    Uploaded by

    Anwar B
    131 views13 pages
    This case involved a dispute between a bank (creditor) and a trading company (borrower) under the SARFAESI Act of 2002. The borrower had taken a loan of Rs. 1.95 crore but defaulted, and the bank initiated auction proceedings to recover the amount owed. The borrower challenged this in court, arguing it had the right to retain the property by depositing the auction's base price. The higher courts agreed but the Supreme Court overturned this, finding that allowing retention for anything less than full repayment violated the SARFAESI Act. The ruling reinforced that the Act aims to allow swift recovery of bad debts for creditors.

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    Bank Of Baroda v/s M/s Karwa Trading Company & Anr.

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    This case involved a dispute between a bank (creditor) and a trading company (borrower) under the SARFAESI Act of 2002. The borrower had taken a loan of Rs. 1.95 crore but defaulted, and the bank initiated auction proceedings to recover the amount owed. The borrower challenged this in court, arguing it had the right to retain the property by depositing the auction's base price. The higher courts agreed but the Supreme Court overturned this, finding that allowing retention for anything less than full repayment violated the SARFAESI Act. The ruling reinforced that the Act aims to allow swift recovery of bad debts for creditors.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    131 views13 pages

    Bank of Baroda V/s M/s Karwa Trading Company & Anr.

    Uploaded by

    Anwar B
    This case involved a dispute between a bank (creditor) and a trading company (borrower) under the SARFAESI Act of 2002. The borrower had taken a loan of Rs. 1.95 crore but defaulted, and the bank initiated auction proceedings to recover the amount owed. The borrower challenged this in court, arguing it had the right to retain the property by depositing the auction's base price. The higher courts agreed but the Supreme Court overturned this, finding that allowing retention for anything less than full repayment violated the SARFAESI Act. The ruling reinforced that the Act aims to allow swift recovery of bad debts for creditors.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    You are on page 1of 13

    Bank Of Baroda v/s M/s

    Karwa Trading Company


    & Anr.
    Avinash Shankar (22456)

    Krishna Aditya (22474)


    INTRODUCTION TO
    ACT

    Agenda MAIN FOCUS OF ACT


    CASE DETAILS
    VERDICTS
    SUMMARY
    Introduction to Act
    SARFAESI Act - Securitisation and
    Reconstruction of Financial Assets
    and Enforcement of Security
    Interest Act, 2002

    ❏ Why SARFAESI Act?


    ❏ Narasimham Committee and Andhyarujina
    Committee
    ❏ What is Sarfaesi Act, 2002, and where is it
    applicable?
    ❏ CERSAI
    ❏ Objectives of the SARFAESI Act
    ❏ Why is the Sarfaesi Act 2002 important?

    2023 MBAG204 3
    Main Focus Of Act
    ❏ Empower banks and financial institutions to recover their non-
    performing assets (NPAs)
    ❏ Speedy recovery of dues
    ❏ No intervention of court
    ❏ Provide a quick and efficient legal framework for the recovery of
    bad debts
    ❏ Asset Reconstruction Companies

    2023 MBAG204 4
    Sections of Act used in case…
    Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI)
    ❏ Section 13(2) – enforcement of interest – notice by a secured creditor to discharge in full his liabilities within 60 days of
    receipt of notice.
    ❏ Section 13(4) – Recourse to secured creditor in case of debtor’s failure to discharge liability within the period stipulated
    under Section 13(2).
    ❏ Section 13(8) – If the dues of the secured creditor together with all costs, charges and expenses incurred by him are

    discharged at any time before the sale, the secured asset shall not be sold or transferred by the secured creditor.
    ❏ Section 14 – Mandates Chief Metropolitan Magistrate or District Magistrate to assist the secured creditor in taking

    possession of a secured asset.


    ❏ Section 17 – Application by any person, including the borrower, against measures to recover secured debts.

    Security Interest (Enforcement) Rules, 2002 (SI Rules).


    ❏ Rule 8 – On such deposit of money for discharge of the encumbrances, the authorised officer may issue or cause the
    purchaser to issue notices to the persons interested in or entitled to the money deposited with him and take steps to make
    the payment accordingly.
    ❏ Rule 9 – The authorised officer shall deliver the property to the purchaser free from encumbrances known to the secured
    creditor on deposit of money as specified in sub-rule (7).

    2023 MBAG204 5
    Abbreviations & Pseudonyms
    ❏ HC (SJB) - High Court (Single Judge Bench).
    ❏ HC (DB)- High Court (Divisional Bench).
    ❏ SC - Supreme Court.
    ❏ DRT - Debt Recovery Tribunal.
    ❏ DRAT - Debt Recovery Appellate Tribunal.
    ❏ Borrower - M/s Karwa Trading Company & Anr.
    ❏ Creditor - Bank of Baroda.

    2023 MBAG204 6
    Brief Snapshot of Case
    Borrower moves DRT against
    Before 2012 creditor and seeks possession of
    Borrower obtains secured loan of Creditor does all formalities… house by depositing base auction
    Rs. 1.95 cr from creditor. calls for auction with base price value.
    Rs. 48.65 Laks. Receives bids
    Defaults & Declared NPA (31st Jan from Rs. 61 lakh to Rs 71 lakh. On Appeal, DRAT upholds DRT’s
    2012) order and increases reserve by Rs. 17
    lakh.

    Creditor moves HC(SJB) against


    DRAT order, saying it was in
    contravention of SARFAESI,
    2022 (Section 13, Subsection (8)) Case presented in SC.

    Order reversed by HC(DB),


    upholding DRAT’s decision.
    Area of Contention
    1. The borrower had not fulfilled his liabilities, and therefore through procedures of
    SARFAESI Act, 2022, the creditor has the rights to possession of property and
    deeds relating to mortgaged assets.
    2. According to Securitization Interest (Enforcement) Rules, there was no barring of
    the defaulting borrower from becoming a bidder in auction. Used by borrower to
    establish a claim on the defaulted, mortgaged property.
    3. According to transfer of property Act, 1889, and a few other acts, until the sale has
    been done, the borrower can stop the sale any time by clearing his liability.
    4. Improper valuation done by courts in deciding the amount to be deposited by the
    creditor.

    2023 MBAG204 8
    Analysis & Verdict
    ❏ At the outset, the Court noted that Division Bench of the High Court, by its
    impugned order, directed the release of the secured property on payment of a
    total sum of ₹ 65.65 lakhs as against the total dues of ₹ 185 lakhs.
    ❏ The Court also noted that appeal before the DRT under Section 17 of
    SARFAESI was still pending on technical grounds as the order of the DRT was
    an interim order only.
    ❏ The Court stated that the amount required to be paid in adherence to the
    directions of the High Court was not the amount realised by the Creditor but
    only the highest bid received and before any further auction proceedings could
    be conducted, the DRT passed an interim order directing to handover the
    possession and original title deed to the respondent upon payment of the base
    price of ₹ 48.65 lakhs.

    2023 MBAG204 9
    Analysis & Verdict
    ❏ This, in the view of the Court, did not tantamount discharge of total dues of the
    secured creditors with all costs, charges and expenses incurred by the secured
    creditor as envisaged under Section 13(8) of SARFAESI. Consequently, it was
    open for the Appellant Bank, being the secured creditor, to sell the property in a
    public auction and realize the amount due.
    ❏ In this regard, the Court remarked that the DRT was also not justified in
    directing the release of the residential property on payment of ₹ 48.65 lakhs.
    ❏ The Court also stated that the payment of ₹ 65.65 lakhs against the total dues
    of ₹ 185 lakhs could not be viewed as the discharge of total liability and even if
    the property were to be sold in an auction, the respondent was liable to
    discharge the balance dues.

    2023 MBAG204 10
    Summary

    2023 MBAG204 11
    Why this case is important?

    2023 MBAG204 12
    Thank You

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