Return of pre-deposit in Sarfaesi suits

A borrower can file an appeal against the Debt Recovery Tribunal (DRT) before the appellate tribunal only if he deposits 50 per cent of the due amount or 50 per cent ordered by the DRT, whichever is less. That is the rule under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act. The appellate tribunal may reduce the amount to 25 per cent. What is the fate of such deposit on the disposal of the appeal? The Supreme Court ruled that the amount is deposited by the borrower with the tribunal and not the creditor and it is not bailment. In the Axis Bank versus SBS Organic case, the borrower sought the return of the pre-deposit after the disposal of the suit. But the bank opposed it and claimed it on the ground that the amount had to be set off against the dues of the borrower. The bank contended that it has to secure the entire debt by proceeding against the secured assets, and therefore, the deposit is liable to be appropriated by the bank. Rejecting the arguments of the bank, the judgment stated that the Act permitted the secured creditor to proceed only against the secured assets. The pre-deposit as a condition is neither a secured asset nor a secured debt, since the borrower has not created any security interest on such pre-deposit in favour of the secured creditor The bank has no lien on the amount either, the judgment said, ordering the return of the pre-deposit.

Auction below floor price 'shocking'

Read more from our special coverage on "BRIEF CASE"

• Auction must fetch fair market value
• More issues for larger SC Benches
• New issues in land acquisition in 1945
• SC orders demolition of Patna building
• Sebi Act lacks clarity, says Supreme Court

The Supreme Court remarked that it was "quite shocking" that a bank auctioned a mortgaged property with a floor price of Rs 42 lakh for Rs 5.5 lakh. Since the sale was full of irregularities, the bank was directed to return the money to the auction purchaser with eight per cent interest from the sale in 1998. In this case, Olinda Femandis versus Goa State Cooperative Bank Ltd, the property belonged to seven members of a family. Three of them signed a mortgage deed for Rs 2 lakh, while others did not consent. The bank, nevertheless, sanctioned the loan. It was not returned, leading to the auction. The court set aside the auction and made arrangement to help one of the owners, who had opposed the mortgage.

Nominee must get co-op membership

A nominee chosen by a deceased member of a cooperative society shall be given possession of the property and shares, but others who have claims of inheritance under succession law can pursue their claims to the property concerned. The Supreme Court ruled so in the judgment of the Indrani Wahi versus Registrar of Cooperative Society case. In this case, the father chose his daughter as the nominee. After his death, the society transferred all interests in the property to his daughter following the West Bengal Cooperative Societies Act. The mother had died and the son claimed his share to the property. The Calcutta High Court allowed his petition and stated that the transfer of property can be done only with the consent of all heirs. The daughter appealed to the Supreme Court. It said that the nomination is binding on the society and it has no option but to transfer membership in the name of the nominee. However, "that would have no relevance to the issue of title between the inheritors or successors to the property of the deceased".

Land acquisition quashed for delay

The Supreme Court quashed the land acquisition notification of the Punjab government because the land was not taken possession by the authorities for more than five years. According to Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, if the land is not taken over within the five-year period, or compensation is not paid within that time, the notification will lapse. In this case, Pavan Kumar versus the State of Punjab, that was the case. Therefore, the court allowed his appeal and let him keep his land.

Delight and despair in arbitration

The Delhi High Court last week dealt with an arbitration case, which it described as "the delight of the lawyers and the despair of the judges." In 2000, disputes arose between the central government and members of a consortium of oil companies, including ONGC, resulting in the constitution of two arbitral tribunals. According to two contracts, arbitration would be governed by the laws in India while the seat of arbitration would be Kuala Lumpur. According to another limb of the agreement, the constitution of the arbitration tribunal and procedure would be according to the laws of England. Arbitration had been held in Kuala Lumpur from where it travelled to Amsterdam, due to a contagion in Malaysia, then to London. Though the proceedings were going on for 13 years, there is no full stop in this case, Cairn India Ltd versus Union of India. The dispute remains whether the arbitration should be conducted in London or Kuala Lumpur. Narrating the complex course of this arbitration, the judgment stated that "the courts in India cannot resolve this dispute. Either the parties agree to the place of sitting by expressly recording that it would only be the venue or they await a decision by the Federal Court of Appeals in Kuala Lumpur… The situation is fairly paradoxical, but courts are faced with such situations. It cannot be helped."

Workers saved from litigation wear-out

In a generous gesture, the Regional Provident Commissioner has withdrawn 41 appeals from the National Consumer Commission against the judgment of the Punjab consumer commission "taking into consideration the cost of litigation and the fact that issue of notice to the workers would result in further harassment to them". In these appeals, RPFC versus Gill Contractor, the state commission had directed the contractor to pay each worker Rs 1 lakh with 18 per cent interest for not depositing the contributions with the commissioner. They were also given Rs 21,000 as cost of litigation. The commission's judgment stated "in case a big contractor is misappropriating the hard earned money of petty workers it is pity, and there should be exemplary costs so that in future such like contractors should not indulge in these types of illegal activities." The commissioner appealed to the National Commission but withdrew all the appeals to save trouble to the workers. In view of this, the legal issues and allegations of false challans were not considered by the National Commission.