Back
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
A.J. Desai, Nikhil S. Kariel, JJ.
Supreme Nutri Grain Private Limited & Others – Appellants
Versus
Dena Bank – Respondent
R/Letters Patent Appeal No. 597 of 2018, In R/Special Civil Application No. 16833 of 2016, Civil Application (For Stay) No. 1 of 2018, Civil Application (For Joining Party) No. 1 of 2020
Decided On : 18-12-2020
SARFAESI Act - Section 17 - Indian Contract Act, 1982 - Section 171 – Debt Recovery and Monetary Laws – Bank – Loan - Whether remedy under Section 17 is an efficacious remedy in fact situation and whether respondent – Dena Bank – now Bank of Baroda was legally empowered not to release the charge over immovable property mortgaged with respondent bank in view of fact that the entire dues in lieu of loan accounts have been repaid and respondent bank has already returned title deeds of property in question - It abundantly clear that action of respondent Dena Bank in not issuing No Due Certificate to the appellant – petitioner and not taking appropriate steps to release its charge over the property inspite of entire loan being paid up by appellant – petitioner by availing loan from Kotak Mahindra Bank Ltd., would not fall under scope and ambit of said Sub-section - Said Sub-section states about recourse to which a secured creditor may take, in case a borrower fails to discharge his liability in full.
Facts of the case: Appellant-Petitioner No.1 is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and whereas the appellant No.2 herein was the guarantor for the loan availed by the appellant No.1 from the respondent bank. The respondent being Dena Bank, now Bank of Baroda, [herein after to be referred to as the Respondent Bank] which is a Banking Company within the meaning of the Banking Regulations Act, 1949. The appellant – petitioner Company had availed a cash credit facility of Rs. 7,00,00,000/- (Rupees Seven Crores) bearing Account and the term loan facility for Rs.4,50,00,000/- (Rupees Four Crores Fifty Lakhs) bearing Account - According to appellants – petitioners, since they were not satisfied with the facility and services provided by the respondent bank, they had approached another bank namely M/s. Kotak Mahindra Bank Limited, which had agreed to provide the loan facilities on terms, which were more suitable to the appellants
Findings of the court: Action of the bank, in not releasing No Due Certificate after loan availed by the appellant petitioner, had been repaid and in not releasing the charge over property kept as loan availed by appellant petitioner, as being without any authority of law. We also hold that the learned Single Judge had erred in rejecting petition on the ground of availability of an alternative remedy under Section 17 of SARFAESI Act - Consequently, quash and set aside the judgment passed by Single Judge in Special Civil Application - Further direct the respondent bank i.e. erstwhile Dena Bank now Bank of Baroda to issue “No Due Certificate” to M/s. Supreme Nutri Grain Private Limited – appellant herein forthwith within a period of four weeks from the date of receipt of this order and we further direct respondent bank to issue consequential letter to Registrar of Companies with a copy to the appellant – petitioner informing Registrar about full and complete satisfaction of loan and to release the charge upon the property/collateral in lieu of loans availed by the appellant – petitioner.
Result: Patent Appeal is allowed.
JUDGMENT :
NIKHIL S. KARIEL, J.
1. Present Letters Patent Appeal arises from the judgment dated 12.04.2018 passed by the learned Single Judge in Special Civil Application No.16833 of 2016, whereby the learned Single Judge has been pleased to dismiss the said writ petition on the ground of availability of alternative remedy under Section 17 of the SARFAESI Act. Two questions arise for our consideration, namely; (a) whether remedy under Section 17 is an efficacious remedy in the fact situation and (b) whether the respondent – Dena Bank – now Bank of Baroda was legally empowered not to release the charge over the immovable property mortgaged with the respondent bank in view of the fact that the entire dues in lieu of the loan accounts have been repaid and the respondent bank has already returned the title deeds of the property in question.
2. Brief facts, which are relevant for the purpose of deciding the present appeal, are as under :
2.1 The appellant – petitioner No.1 is a Private Limited Company incorporated under the provisions of the Companies Act, 1956 and whereas the appellant No.2 herein was the guarantor for the loan availed by the appellant No.1 from the respondent bank. The respondent being Dena Bank, now Bank of Baroda, [herein after to be referred to as the Respondent Bank] which is a Banking Company within the meaning of the Banking Regulations Act, 1949. The appellant – petitioner Company had availed a cash credit facility of Rs. 7,00,00,000/- (Rupees Seven Crores) bearing Account No.060213023949 and the term loan facility for Rs.4,50,00,000/- (Rupees Four Crores Fifty Lakhs) bearing Account No.060254023837. According to the appellants – petitioners, since they were not satisfied with the facility and services provided by the respondent bank, they had approached another bank namely M/s. Kotak Mahindra Bank Limited, which had agreed to provide the loan facilities on terms, which were more suitable to the appellants. It is the case of the appellants that Kotak Mahindra Bank Limited had issued sanction letter on 02.05.2016 subject to the various conditions mentioned in the sanction letter; conditions mentioned under the heading ‘for take over facility’ at the internal page 10 of the sanction letter, more particularly, condition No.3 stating that before disbursement, confirmation from Dena Bank to be obtained regarding handover all property papers; condition No.6 inter alia stating that Kotak Mahindra Bank will pay outstanding amount directly to the Dena Bank and will get property papers; and condition No.7 being that No Due Certificate shall be obtained from Dena Bank with release of Pay Order/RTGS.
2.2 That the Kotak Mahindra Bank had directly paid the full outstanding amount of Rs.6,98,48,727/- and Rs.2,05,00,000/-, totalling to Rs.9,03,48,727/- in lieu of the abovementioned loan accounts by RTGS to the respondent bank on 27.05.2016. Kotak Mahindra Bank had thereafter written a letter dated 27.05.2016 informing the respondent Bank of having sanctioned credit facilities to the appellant – petitioner and also informed regarding the details of payment made by them and further requesting the respondent Bank to adjust the payment accordingly and issue “No Objection Certificate” and also to provide original property papers with regard to the loan accounts of the appellant – petitioner with the respondent Bank. Said letter has been received by the respondent Bank. It appears that an Email communication had been sent to the respondent bank by the appellant – petitioner informing the respondent Bank inter alia that the loan accounts of the appellant – petitioner has been closed as all the dues have been paid, but mortgage has not been released and the respondent bank has not replied to Kotak Mahindra Bank or to the appellant – petitioner and whereas it was also mentioned that if any documents are required for release of the mortgage, the same may be intimated to the appellant – petitioner. In reply to the same, vide trail Email
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
