2016 (12) TMI 1561 - HC - Indian Laws

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 certificate granted under Section 19(22) has, in our opinion, to be executed only by the Recovery Officer. It is also observed that the adjudication of liability and the recovery of the amount by execution of the certificate are respectively within the exclusive jurisdiction of the Tribunal and the Recovery Officer and no other Court or authority much less the Civil Court or the Company Court can go into the said questions relating to the liability and the recovery except as provided in the Act. Considering 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 respondent No.1 for drawing contempt proceedings against the officers of the appellant - Bank for non-compliance of the order dated 9/09/2016, 26/11/2016 and 22/11/2016.Admittedly, the amount was deposited in the account of respondent No.1 only on 18/11/2016 and, thus, we direct the office to register the application for drawing contempt petition against the appellants as per rules, separately and fix the matter in the first week of January, 2017.

Summary

Issues:
1. Interpretation of Section 13(7) of the SARFAESI Act, 2002 regarding refund of surplus amount.
2. Application of Section 171 of the Indian Contract Act, 1872 in the case.
3. Jurisdiction of the Recovery Officer in debt recovery proceedings under the Act.

Analysis:

1. The main issue in this case was the interpretation of Section 13(7) of the SARFAESI Act, 2002, concerning the refund of a surplus amount by the bank to the guarantor of a loan. The respondent, a guarantor, argued that the bank had surplus funds after selling the mortgaged property and should refund the excess amount along with interest. The court agreed with the respondent, stating that the surplus amount could not be appropriated for other outstanding dues, directing the bank to refund the amount along with interest.

2. Another crucial aspect was the application of Section 171 of the Indian Contract Act, 1872, which deals with the general lien of bankers. The bank claimed a general lien on the surplus amount, justifying its adjustment against the outstanding dues of another account held by the guarantor. However, the court ruled that the surplus amount could not be appropriated using the general lien provision, emphasizing that there were separate contracts for the different accounts and the surplus should be refunded.

3. The judgment also delved into the jurisdiction of the Recovery Officer in debt recovery proceedings under the Act. Citing the case of Allahabad Bank vs Canara Bank, the court highlighted that the Recovery Officer had exclusive jurisdiction in debt recovery matters. The court clarified that the Recovery Officer should execute the certificate issued by the Tribunal for debt recovery, and other courts or authorities outside the Act should not interfere in the recovery process.

In conclusion, the High Court of Madhya Pradesh upheld the order directing the bank to refund the surplus amount to the guarantor along with interest. The court dismissed the writ appeal, emphasizing that the bank could not retain the surplus amount using the general lien provision and that the Recovery Officer had exclusive jurisdiction in debt recovery proceedings under the Act.