Assignments of debt by banks to Asset Reconstruction Companies are valid under the SARFAESI Act and RBI guidelines; such agreements are not rendered invalid solely because they are registered outside the state where the mortgaged property is situated, in the absence of state-specific restrictive legislation.

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ASSIGNMENT AGREEMENT DATED 01.10.2020, REGISTERED BEFORE THE OFFICE OF THE SUB-REGISTRAR, OF OTHER STATE, ON THE ASSETS AND LIABILITIES SITUATED IN THE STATE OF KARNATAKA, DEPRIVING THE LEGITIMATE STAMP DUTY PAYABLE TO THE GOVERNMENT OF KARNATAKA, WHICH HAS CAUSED LOSS TO THE STATE EXCHEQUER.

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO-SET ASIDE THE ILLEGAL ORDERS DTD 21/12/2022, ANNEXURE-C PASSED BY THE HONBLE DRT-II, BANGALORE, ALLOWING ASSIGNMENT OF O.A. 166/19, IN FAVOUR OF R-2 IN THE PLACE OF R-1 WITHOUT HEARING THE PETITIONERS ARGUMENTS., AND ETC.

THESE PETITIONS, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI

ORAL ORDER

IN W.P. No.13563/2025

The present writ petition is filed seeking the following prayers:

"(A) To Set Aside the Assignment Agreement dt.01.10.2020, Registered before the office of the Sub-Registrar, of other state, on the assets and liabilities situated in the State of Karnataka, depriving the legitimate Stamp Duty payable to the Government of Karnataka, which has caused "Loss to the State Exchequer.

(B) Grant such other relief, which this Hon'ble Court deems fit under the facts and circumstance and on question of law, as stated Supra and in the Interest of Justice."

2. It is the case of the petitioners that the first respondent/company has invoked measures under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (for short 'SARFAESI Act') pursuant to the Assignment Agreement dated 01.10.2020. Prior thereto, the second respondent/Bank had issued a Demand Notice dated 10.06.2020 under Section 13(2) of the SARFAESI Act. It is stated that the first respondent Company ought to have reclassified the account as 'Non-Performing Assets' (for short 'NPA') subsequent to assignment of debt, by virtue of the Assignment Agreement dated 01.10.2020. The petitioners state that they had availed a credit facility of Rs.5,30,00,000/- from the second respondent/Bank in the year 2018 for the purpose of developing their Electrical Goods and Equipment business. Due to the COVID-19 pandemic, the petitioners were unable to repay the loan and consequently, the loan account was classified as NPA on 03.02.2020.Thereafter, the second respondent Bank assigned the debt in favour of the first respondent, namely CFM Assets Reconstruction Private Limited, by executing an Assignment Agreement dated 01.10.2020.

3. It is the case of the petitioners that the first respondent/company ought to have reclassified the account as NPA and it cannot continue the proceedings from the stage at which the second respondent/Bank had left. Thereafter, an order came to be passed under Section 14 of the SARFAESI Act by the ACMM Court in Crl. Misc. No. 5026/2023 dated 22.10.2023.

4. It is contended by the learned counsel for the petitioner that the first and second/respondents, without paying the requisite stamp duty as prevailing in the State of Karnataka, proceeded to issue the Possession Notice. It is also the case of the petitioners that, without appreciating these facts and the questions of law, the Debts Recovery Tribunal dismissed S.A. No. 105/2023 by order dated 29.04.2023.

5. The petitioners contend that unless and until the said Assignment Agreement is duly stamped and registered in the State of Karnataka, the same is not enforceable in law. Hence, the petitioners